SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K
                 [X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934
                   For the fiscal year ended December 31, 1999
                                             -----------------
                                       or
     [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE
                                  ACT OF 1934

                        Commission file number: 000-18601

                               TRANSIT GROUP, INC.
             (Exact name of Registrant as specified in its charter)

                             State of Florida
     (State or other jurisdiction of incorporation or organization)

                                 59-2576629
                     (I.R.S. Employer Identification No.)

     2859 Paces Ferry Road, Suite 1740, Atlanta, GA                 30339
        (Address of principal executive offices)                  (Zip Code)

     Registrant's telephone number including area code: (770) 444-0240

     Securities registered pursuant to Section 12(b) of the Act:
     Title of Each Class              Name of  Exchange  on which  registered
    Common  Stock                               NASDAQ  SmallCap  Market
    Warrants(two warrants entitle the holder    NASDAQ  SmallCap
    to purchase at a price of $7.50 per share,
    one share of common stock)

Check whether  issuer (1) has filed all reports  required to be filed by Section
13 or 15(d) of the  Securities  and Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was required to file such
reports),  and (2) has been subject to such filing  requirements for the past 90
days. Yes X No __

Check if there is  disclosure  of  delinquent  filers in response to Item 405 of
Regulation  S-K is not  contained  in this  form,  and  disclosure  will  not be
contained,  to the  best of  registrant's  knowledge,  in  definitive  proxy  or
information  statements  incorporated by reference in Part III of this Form 10-K
or any amendment to this form 10-K.[ ]

The aggregate market value of the voting common stock held by the non-affiliates
of the  registrant was  $83,537,346  based on the closing sale price reported on
March 24, 2000.

There were  31,823,751  shares of the Company's  common stock  outstanding as of
March 24, 2000.

Documents  Incorporated  by Reference:  Portions of the Proxy  Statement for the
Registrant's  2000 Annual Meeting of Shareholders  are incorporated by reference
into Part III.
<PAGE>

                                     PART I

Item 1. BUSINESS

Introduction

Transit  Group,  Inc. is a holding  company  concentrating  on the  acquisition,
consolidation,  and  operation of short and long haul  trucking,  logistics  and
intermodal companies.  To date we have acquired 19 trucking companies throughout
the U.S. and Canada.

Forward-Looking Statement

This Annual Report on Form 10-K contains certain forward-looking  statements, as
defined in the Private  Securities  Litigation Reform Act of 1995,  including or
related  to our future  results  (including  certain  projections  and  business
trends).

These and other statements, which are not historical facts, are based largely on
current  expectations  and assumptions of management and are subject to a number
of risks and uncertainties  that could cause actual results to differ materially
from those contemplated by such forward-looking statements.  Assumptions related
to  forward-looking  statements include that we will continue to be competitive,
our acquisition  strategy will remain  successful,  we will retain key personnel
and  competitive  conditions  within our markets will not change  materially  or
adversely.

Assumptions  relating  to  forward-looking  statements  involve  judgments  with
respect  to,  among  other  things,  future  economic,  competitive  and  market
conditions  and  future  business  decisions,  all of  which  are  difficult  or
impossible to predict accurately and many of which are beyond our control.  When
used in this Annual  Report,  the words  "estimate,"  "project,"  "intend,"  and
"expect"  and similar  expressions  are  intended  to  identify  forward-looking
statements.  Although we believe that assumptions underlying the forward-looking
statements are reasonable,  any of the assumptions  could prove  inaccurate and,
therefore,  there  can be no  assurance  that the  results  contemplated  in the
forward-looking   information  will  be  realized.   Management   decisions  are
subjective  in many respects and  susceptible  to  interpretations  and periodic
revisions based on actual  experience and business  developments,  the impact of
which may cause us to alter our business  strategy or capital  expenditure plans
which  may,  in  turn,  affect  our  results  of  operations.  In  light  of the
significant  uncertainties inherent in the forward-looking  information included
herein,  the  inclusion  of  such  information  should  not be  regarded  as our
representation  that any  strategy,  objectives or other plans will be achieved.
The forward-looking  statements contained in this Annual Report speak only as of
the date of this Annual  Report,  and we do not have any  obligation to publicly
update or revise any of these  forward-looking  statements.  Any forward looking
statements  should be read in  conjunction  with the risk  factors  contained in
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations" on page 13 herein.










<PAGE>

Industry Overview

The  trucking  industry can be divided  into four  general  categories:  Package
Delivery, Less-than-Truckload, Household Goods, and Truckload ("TL"). We operate
in the TL segment of the trucking industry, which is highly fragmented with over
35,000 companies.

The following trends are evolving in the TL segment:

o        Shippers  are  limiting  the  number of  carriers  to larger  more
         efficient trucking companies who can provide a consistent level of
         service at a competitive price.
o        Companies  are  outsourcing   their  shipping  needs  to  trucking
         companies who can offer a full range of logistic services.
o        The  advent  of  just-in-time   inventory   systems  has  demanded
         significant    levels   of   technology   to   provide   reliable,
         time-definite service.

Many smaller trucking  companies face increasing  obstacles in competing in this
environment.  We believe  that many of these  companies  would  benefit  from an
affiliation  with a larger  organization  such as Transit Group. We believe that
our size,  range of services offered and continued growth will enable us to take
advantage of these trends in the TL segment of the trucking  industry.  Based on
industry statistics, management believes that we are the ninth largest truckload
carrier in North America.

History and Development

The Company was incorporated on August 28, 1985 as General Parcel Service, Inc.,
a Florida corporation engaged in the parcel delivery business.  Operations began
in  Jacksonville,  Florida and expanded into Georgia,  North  Carolina and South
Carolina. Due to unprofitable results parcel delivery operations ceased in March
1997.

In January 1997, the Company reorganized into a holding company structure and we
began the  acquisition  of mid-size short and long haul trucking  companies.  We
have  acquired 19 companies  during the period from July 1997  through  December
1999.  These  companies  operate  both  directly  and through  agents to provide
truckload, logistics and intermodal services to our customers.

Acquisitions

We have  built a  national  trucking  company  by  acquiring  TL,  logistic  and
intermodal carriers, which meet certain criteria.  Initially, our primary source
of  acquisition  candidates  was  brokers.  Currently,  the  primary  source  of
acquisition candidates is through referrals.

We seek to  identify  for  acquisition  trucking  companies  with the  following
attributes:

o        Profitable
o        Revenues in excess of $5 million
o        Strong market position
o        Sound management with key personnel committed to our strategy
o        Commitment to a high level of quality and service

Our expansion plans are dependent upon the  availability of, among other things,
suitable acquisition candidates,  adequate financing,  qualified personnel,  and
our future  operations and financial  condition.  When  identified,  a potential
candidate is evaluated on its ability to open new lanes and geographic  areas or
its capacity to exploit existing markets, customers, and lanes.
<PAGE>

If it is  determined  that  the  candidate  will be a "fit,"  certain  financial
screens are utilized to further evaluate potential acquisitions.  We have sought
to acquire  companies  principally  on a multiple  of pre-tax  income and EBITDA
(earnings before interest, taxes, depreciation, and amortization). If the target
passes these screens,  we will perform our  operational,  financial,  legal, and
environmental  due diligence  procedures.  Depending  upon the complexity of the
organization  and time devoted to negotiating  the purchase  price,  it can take
from three to six months to consummate an acquisition.

During 1999, we talked with  approximately 150 trucking  companies who expressed
interest in being acquired by us. Of these 150 companies,  approximately 50 were
visited by our  personnel,  and an outside  accounting  firm  performed  certain
procedures at nine of the  companies,  eight of which were  ultimately  acquired
during 1999.

We have acquired the following 19 companies since July 1997:

                                                                       Date
                 Company                                             Acquired

     Carolina Pacific Distributors, Inc.                             07/11/97
     Service Express, Inc. (1)                                       08/16/97
     Capitol Warehouse, Inc.                                         08/16/97
     Carroll Fulmer Group, Inc. (2)                                  08/30/97
     Rainbow Trucking, Inc. (3)                                      12/30/97
     Transportation Resources and Management, Inc.  (4)              01/31/98
     Certified Transport, Inc. (5)                                   05/05/98
     KJ Transportation, Inc.                                         06/17/98
     Network Transportation, Inc.                                    07/13/98
     Diversified Trucking, Inc.                                      08/05/98
     Northstar Transportation, Inc.                                  08/11/98
     Priority Transportation, Inc.                                   01/19/99
     Massengill Trucking Service, Inc.                               03/03/99
     KAT, Inc.                                                       03/22/99
     R&M  Enterprises, Inc.                                          07/19/99
     MDR Cartage, Inc.                                               07/30/99
     Bestway Trucking Services, Inc.                                 07/30/99
     Fox Midwest, Inc.                                               09/27/99
     Land Transportation, LLC                                        11/04/99


(1)      In connection with the acquisition of Service  Express,  we granted the
         selling  shareholders the right,  through August 15, 1998, (extended to
         February  1999) to require us to redeem $1.8 million of the shares that
         they  received.  Through  December 31, 1998,  these  shareholders  sold
         certain  shares in a private  transaction  for a price of $0.4 million.
         The shareholders sold a portion of these shares to a third party and we
         acquired the remaining shares for an aggregate price of $1.4 million in
         January 1999.
(2)      In connection with the  acquisition of Carroll  Fulmer,  we granted the
         selling  shareholders  the right to require  that either we redeem or a
         major  shareholder  acquire  up to $6.0  million of stock at a price of
         $3.60 per share.  These  redemption  rights  expire  August  29,  2003.
         Through  December 31, 1999,  we have  redeemed  $75,000 in stock from a
         selling  shareholder and the shareholders have sold shares in a private
         transaction  for  approximately  $2.25  million,  thereby  reducing our
         remaining obligation to approximately $3.675 million.
(3)      We have made loans to certain  selling  shareholders  in the  aggregate
         amount of $675,000,  which became due on June 30, 1999.  If the average
         closing  price per share of our common  stock for the  period  June 23,
         1999  through  June 29, 1999 was less than $6.625 per share,  the notes
         would be  non-recourse  to such  extent  and the  debtor  would  not be
         personally  liable for such  deficiency,  but we would be entitled to a
         return of a proportionate  amount of our stock. For the period June 23,
         1999  through  June 29, 1999 the average  price of our common stock was
         $6.35 per share.  In July 1999,  these  shareholders  redeemed  101,887
         shares in full satisfaction of this obligation.
(4)      A $0.2 million recourse loan, due April 30, 1999, was made to a selling
         shareholder.  In April 1999, we advanced an additional  $200,000 to the
         shareholder and extended the note to May 31, 2000.
(5)      A $0.4  million  recourse  loan,  due  November  4,  1999 was made to a
         selling shareholder. In November, this note was extended to May 4, 2000

See "Management's  Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."

Operations

Our business  operations  are divided  between the corporate  office,  currently
located in Atlanta,  Georgia and its  operating  divisions  and  locations.  The
corporate  office is responsible  for the overall  direction of our  operations,
information systems, finance, banking, human resources, and financial reporting.

Carolina  Pacific  Distributors  ("Carolina  Pacific")  -  Founded  in 1977  and
headquartered in High Point,  North Carolina,  Carolina Pacific provides dry van
and refrigerated  transportation services between major markets in the Carolinas
and  the  West  Coast.   Carolina  Pacific   transports  a  variety  of  general
commodities,  including  textiles and  tobacco,  and serves as a carrier for the
produce industry.

Service  Express  ("Service  Express") - Service  Express,  founded in 1963,  is
headquartered in Tuscaloosa,  Alabama. Service Express operates primarily in the
Southeastern  United  States and  transports  a variety of general  commodities,
including paper, resins, magnetic tapes and chemicals.

Transit Leasing,  formerly known as Capitol  Warehouse  ("Capitol  Warehouse") -
Located  in  Louisville,   Kentucky,  Transit  Leasing  had  both  trucking  and
warehousing  operations.  During fiscal 1998 the trucking operations were merged
into those of Rainbow  Trucking  (see  below) and the  warehouse  component  was
phased out and terminated in March 1999.

Carroll  Fulmer  Group  ("Carroll   Fulmer")  -  Carroll  Fulmer  is  a  general
commodities hauler headquartered in Groveland,  Florida. Carroll Fulmer operates
primarily  through  19 agent  offices.  Approximately  42% of its  revenues  are
generated through brokerage  operations and the balance through  owner/operators
and company  owned  equipment.  Carroll  Fulmer  transports,  among other items,
beverages, household goods and foodstuffs.

Rainbow Trucking  Services,  Inc.  ("Rainbow") - Rainbow was founded in 1982 and
was headquartered in Louisville,  Kentucky. During 1998, the trucking operations
of Transit Leasing was merged into Rainbow.  Rainbow transported a wide range of
general commodities,  including plastics,  paper and glass throughout the United
States.  In 1999 the  operations  of Rainbow were merged into Bestway  Trucking,
Inc. (see below).

Transportation  Resources  and  Management  ("TRM")  - Founded  in 1979,  TRM is
headquartered  in Fort Wayne,  Indiana.  TRM  operates  primarily in the Midwest
(Northern  Indiana,  Ohio,  Illinois and Michigan)  and  transports a variety of
general commodities, including copper wire and carpet padding.

Certified  Transport  ("Certified") - Headquartered  in  Indianapolis,  Indiana,
Certified  began  operations  in 1991.  Certified's  lanes are  primarily in the
Midwest and Canada.  Certified maintains a logistics division in addition to its
trucking  operation,  which  services  the  automotive,  wrapping  and air cargo
industries.

KJ  Transportation  ("KJ") - KJ is located in Farmington,  New York. KJ operates
several divisions including, a brokerage division, which generates approximately
28% of their revenue,  and a trucking  division,  which can be divided between a
dry van and a refrigerated division. A truck leasing operation and a maintenance
division,  which services the equipment of certain  Transit Group  companies and
third parties, are conducted through J&L Truck Leasing, Inc. of Farmington,  New
York. The trucking division operates throughout the U.S. with primary lanes from
the  Northeast to the  Southeast  and from the  Northeast to the West Coast.  KJ
transports a variety of  commodities  with  particular  emphasis in the food and
beverage industries.

Network  Transportation  ("Network") - Network was our first acquisition outside
the U. S.  Network  operates  a fleet  of dry van  and  refrigerated  units  and
services the food industry in the Toronto - Montreal  corridor  with  additional
service to the Northern U.S.

Diversified  Trucking  ("Diversified")  - Diversified  operates out of LaGrange,
Georgia and is a carrier for the apparel, paper and consumer goods industries.

Northstar  Transportation  ("Northstar") - Northstar is headquartered in Dothan,
Alabama. Northstar services the food, paper, and industrial products industries.
Northstar is the third company acquired by us in Alabama.

Priority Transportation,  Inc. ("Priority") - Priority,  located in northeastern
Mississippi,  was  acquired in January  1999 and is a carrier  for the  consumer
electronics,  paper, and paint industries. Priority also maintains warehouse and
cross dock facilities for its customers.

Massengill  Trucking Service,  Inc.  ("Massengill") - Massengill was acquired in
March  1999.  Organized  in 1950,  Massengill  is a  carrier  for the  furniture
industry, servicing the Midwest and Northeast.

KAT, Inc.  ("KAT") - Headquartered in Chesterton,  Indiana,  KAT was acquired in
March 1999.  Approximately  65% of its revenue is derived from its  refrigerated
operations. KAT's primary operational area is east/west from Denver, Colorado to
upstate New York. KAT is a carrier for the food industry.

R&M Enterprises  ("R&M") - R&M and its brokerage  affiliate,  Williams Brothers,
are headquartered in Gretna, Nebraska. Acquired in July 1999, R&M is primarily a
refrigerated  carrier that  operates in an east - west pattern from the mid-west
to the west coast of the U.S.

 MDR Cartage, Inc. ("MDR") - MDR was also acquired in July 1999 and operates out
of  their  headquarters  in  Jonesboro,  Arkansas.  A dry  van  carrier  MDR has
satellite locations in Ohio, Tennessee, Alabama and North Carolina.

Bestway  Trucking,  Inc  ("Bestway")  - Bestway is  located  in  Jeffersonville,
Indiana  (near the Indiana - Kentucky  border)  with  additional  operations  in
Nashville  and Gibson,  Tennessee.  In  connection  with this  acquisition,  the
operations of Rainbow and Capitol were merged into those of Bestway.

Transit  Logistics,  LLC ("Transit  Logistics") -  Headquartered  in Fort Wayne,
Indiana  Transit  Logistics  was organized in August 1999 to manage a portion of
the freight operations of Superior Essex Wire.

Fox Midwest  Transport,  Inc.  ("Fox") - Acquired in September 1999, Fox and its
dedicated   fleet   operation,   Shippers   Distribution   Services,   Inc.,  is
headquartered in Green Bay, Wisconsin.  Fox is a major carrier for the paper and
paper products industries.

Land  Transportation,  LLC  ("Land")  -  Land  was  our  first  non-asset  based
acquisition.  Land is comprised of three operations:  an owner operator division
(approximately  70% of  revenue)  a  brokerage  division  (approximately  15% of
revenue) and an intermodal division (approximately 15% of revenue.)

We have  engaged  in ongoing  discussions  with other  truckload  carriers.  The
resolution of these  discussions  is dependent  upon,  among other  things,  the
ability to secure financing,  the price of our common stock,  market conditions,
and the status of the economy.


Structure

We plan to expand our growth strategy from the acquisition of trucking companies
exclusively,  to the  partnering  with agents.  Further,  we believe that we can
enhance profitability by allowing the operating divisions to focus on increasing
sales  volumes,  maintaining  and  enhancing  customer  service  and  hiring and
retaining  drivers  and by  continuing  to  develop an  organization  that takes
advantage of operating synergies and improved purchasing power. Progress towards
these objectives include:

o    At December 31, 1999 we had merged 16 of our 19 corporate entities into our
     wholly  owned  subsidiary  - Transit  Group  Transportation,  LLC  ("TGT").
     Bestway and Land will be merged into TGT by the end of 2000.  These mergers
     should  reduce  the filing  requirements  of our  companies  in the area of
     income taxes,  franchise fees, fuel taxes,  plating and registration  fees,
     and other licensing requirements.

o    We announced the relocation of our corporate office to Groveland,  Florida.
     The relocation of the corporate office should enhance the  functionality of
     our  existing  Corporate  Services  division.  With  this  relocation,  all
     consolidated  back  office  functions   including   accounting,   financial
     reporting,  fuel taxes, risk management,  payroll,  credit and collections,
     disbursements,  safety and purchasing will be managed from one location. It
     is anticipated that this will reduce the cost of performing these functions
     on a decentralized basis.

o    We are committed to converting to one operating  system. We anticipate that
     all of our 19 divisions will be operating on the same platform by September
     2000. This common operating system should facilitate load matching, enhance
     equipment utilization, and increase revenue per mile.

o    Due to our size we are realizing  increased fuel discounts for both company
     equipment  and  owner  operators.  As a  result,  we  have  experienced  an
     improvement in the hiring and retention of owner operators.

o    During 1999,  we entered  into an  agreement  to purchase 600  Freightliner
     tractors  with Cummins  engines over the next two years.  Through  December
     1999,  we have  acquired 280 of these  units.  We believe that the purchase
     price of this equipment is lower than any of the individual companies could
     have negotiated on their own. Additionally,  this commitment will allow the
     Company to further  standardize our fleet thereby reducing  maintenance and
     training costs and enhancing equipment utilization.

o    We are  committed to installing  satellite  communications  and  monitoring
     equipment  throughout  our fleet.  During 1998,  we agreed to acquire 3,000
     units  from  Qualcomm,  a  leading  communications  software  vendor in the
     transportation  industry over a three-year  period.  Many national shipping
     customers  require  communication  between  dispatch and  drivers.  To date
     substantially all of our trucks are utilizing communication software.



Sales, Marketing, and Logistics


We market our  services  through our own sales force and a developed  network of
brokers and agents operating throughout the U.S., Canada, and Mexico.

Substantially all of the companies we acquired are core carriers for one or more
shippers.  They were limited from  expanding  that  relationship  due to various
financial and  operational  constraints.  Due to the capacity of the  affiliated
companies and the enhanced  financial  resources of the  consolidated  group, we
have been able to expand certain core carrier  relationships  and have initiated
discussions for the expansion of others.

In August 1999, we entered into an agreement  with Superior  Essex Wire (located
in Fort Wayne, Indiana) to handle certain of their distribution requirements. We
anticipate  this agreement  will increase that  operations'  annual  revenues by
approximately $20 million in 2000.

Internet Solutions

We recognize  the needs and  opportunities  created by the  increased use of the
internet. In the first quarter of 2000, we introduced our affiliated entities to
The Transit Load Sharing  internet  site.  All of our unmatched  loads for those
divisions on the Innovative  operating system are  automatically  posted to this
site.  Divisions  not yet  converted  to the  Innovative  operating  system post
unmatched loads manually.  Affiliates  have constant,  real-time  access to this
data. We anticipate that this site will enhance  equipment  utilization,  reduce
deadhead miles and increase our rate per mile.

Customers,  after passing certain security and password  barriers,  will also be
able to locate their shipment and determine its arrival time,  thereby improving
customer service.

We intend to continue to enhance the services  offered to our  customers and our
divisions through the internet.  To assure that we develop competitive  internet
solutions,  we are  discussing  alliances with certain  software  developers who
would manage the development on our behalf.

Fleet Summary

We have a policy to trade-in  power units on a 3-4 year cycle (400,000 - 500,000
miles) and trailers  approximately every 5-7 years. A summary of our fleet is as
follows (number of units):

<TABLE>
<CAPTION>
                                                                        December 31,
                                                       -----------------------------------------------
                                                               1999                       1998
                                                       ---------------------       -------------------

<S>                                                            <C>                         <C>
           Company Tractors                                    2,305                       1,401
           Owner/Operators                                     1,346                         566
                                                       ---------------------       -------------------

                Total Power Units                              3,651                       1,967
                                                       =====================       ===================

           Trailers                                            7,164                       3,921
                                                       =====================       ===================
</TABLE>

The average age of our tractors and trailers is 2.0 and 4.5 years, respectively.

Debt Conversion

In May  1997,  we  agreed  to a  debt-for-equity  conversion  that  reduced  our
long-term  debt.  T. Wayne  Davis,  Chairman  of the Board,  and his  affiliates
assumed  approximately  $4.7  million of our debt in  exchange  for 2.7  million
shares of our common stock. In May 1997, we also received a capital  infusion of
approximately  $1.2 million  from  Messrs.  Davis and Belyew in exchange for the
issuance of an aggregate of 687,000 shares of our restricted common stock.

Discontinued Operations

In  December  1997,  we sold  the  parcel  delivery  business  to a  corporation
controlled by affiliates of our Chairman. In this transaction, the buyer assumed
liabilities of approximately $4.0 million in excess of assets. To compensate for
the estimated excess liabilities  assumed by the buyer, we issued 876,569 shares
of restricted common stock to the buyer. In 1999, we issued an additional 50,130
shares of common stock in final  satisfaction of all liabilities  assumed by the
buyer.

Competition

The trucking industry is highly  competitive and subject to pressures from major
business cycles.  We believe that competition in the trucking  industry is based
primarily on service and efficiency.

The  shipping   requirements   of   "just-in-time"   inventory   systems  demand
geographically  diverse  trucking  companies  with  well-developed  tracking and
dispatching  information  systems. We anticipate that the trucking industry will
continue to consolidate and remain extremely  competitive for both customers and
qualified  personnel  and that TGI's  current size and  anticipated  growth will
allow us to participate in the consolidating  trucking industry.  However, there
is  significant  disparity in our revenues and financial  resources and those of
the largest  trucking  companies.  There is no assurance that we can continue to
maintain our growth.

We compete with many trucking companies located in the market areas we serve. We
believe that there is not a dominant  competitor  in the trucking  industry that
competes directly with us.



<PAGE>


Potential Liability

Potential liability associated with accidents in the trucking industry is severe
and occurrences are  unpredictable.  The industry is also subject to substantial
workers'  compensation expense. A material increase in the frequency or severity
of accidents,  workers'  compensation  claims, or an unfavorable  development of
existing  claims can be expected to adversely  affect our operating  income.  We
believe  that we have  insurance  coverage  sufficient  to cover  most  expected
losses.

Regulation

Prior to 1995, the trucking  industry was regulated by the  Interstate  Commerce
Commission  ("ICC").  Effective  January 1,  1995,  the ICC was  eliminated  and
substantially  all of its key functions  were  transferred  to the Department of
Transportation  ("DOT").  The DOT governs  such  activities  as drug and alcohol
testing, hours of service, rates, insurance, reporting, and accounting systems.

We  are  also  subject  to the  regulations  promulgated  by  the  Environmental
Protection Agency and similar state regulatory agencies regarding  environmental
laws and regulations.  These agencies address matters  concerning the management
of hazardous  wastes,  the discharge of pollutants  into the air,  surface,  and
underground waters, and the disposal of certain substances. Violation of certain
applicable laws and regulations could result in clean-up costs, property damage,
and other fines or  penalties.  We believe that our  operations  are in material
compliance with current laws and regulations.

Employees

We  employ  approximately  3,100  employees,  of which  approximately  2,200 are
drivers,  200 work in various garage facilities,  and 700 work in administrative
and  operational  capacities  at the  divisional  locations and in the corporate
office. None of our employees are covered by collective  bargaining  agreements,
and we believe that our relationship with our employees is satisfactory.

Fuel

Fuel represents a significant cost of operating our fleet. In the fourth quarter
of 1999 fuel was  approximately  37% higher  than the same period a year ago. In
the first quarter of 2000 fuel prices continued to increase. We have been unable
to pass along all of these  increases to our  customers.  If prices  continue at
these levels or increase further, our operations may be negatively impacted.




<PAGE>


Item 2. PROPERTIES

We have our primary operations at the following locations:

                                     Lease/
               Location                                  Own
----------------------------------------          -------------------

High Point, North Carolina                              Lease
Tuscaloosa, Alabama                                     Lease
Groveland, Florida                                       Own
Fort Wayne, Indiana                                     Lease
Indianapolis, Indiana(1)                                Lease
Farmington, New York                                    Lease
Mississauga, Canada                                     Lease
La Grange, Georgia                                      Lease
Dothan, Alabama                                         Lease
Olive Branch, Mississippi(1)                            Lease
Hickory Flat, Mississippi                                Own
Chesterton, Indiana                                     Lease
Gretna, Nebraska                                        Lease
Jonesboro, Arkansas                                     Lease
Jeffersonville, Indiana                                 Lease
Green Bay, Wisconsin                                    Lease
Forest Park, Georgia                                    Lease

(1) Includes warehouse facilities.

Our  headquarters,  are  currently  located  in  Atlanta,  Georgia  and  include
approximately  2,700  square feet of office  space.  We intend to  relocate  our
headquarters to Groveland, Florida in the second quarter of 2000.



Item 3. LEGAL PROCEEDINGS

The Company  and its  property  are not a party to or a subject of any  material
pending legal  proceedings  other than routine  litigation that is incidental to
its business.

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None









<PAGE>


                                     PART II

Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Our  Common  stock is traded on the NASDAQ  SmallCap  Market  under the  trading
symbol "TRGP." Our warrants are traded on the NASDAQ SmallCap Market,  under the
trading symbol  "TRGPW." As of March 24, 2000,  there were 367  shareholders  of
record of the common  stock and 12 warrant  holders  of  record,  not  including
individuals  and entities  holding shares in street name. The closing sale price
for our common stock on March 24, 2000, was $2.625, and the closing price of our
warrants was $1.063.

The  quarterly  high and low  closing  bid prices of our common  stock are shown
below:
<TABLE>
<CAPTION>

                       Market Price of Common Stock - TRGP

                                          2000(1)                             1999                            1998
                                   -----------------------            ----------------------          ----------------------
                  Quarter             High        Low                    High        Low                    High  Low
<S>                                  <C>         <C>                      <C>     <C>                     <C>     <C>
                   First             $3.125      $1.875                   $5.250  $3.938                  $6.500  $5.000
                   Second             ----        ----                     6.750    4.313                  8.000    5.87
                   Third              ----        ----                     6.688    3.938                  7.875    3.250
                   Fourth             ----        ----                     4.594    3.000                  6.000    3.125
</TABLE>

(1)       Includes through March 24, 2000.

The quarterly high and low closing bid prices of our warrants are shown below:
<TABLE>
<CAPTION>

                        Market Price of Warrants - TRGPW

                                         2000(1)                               1999                            1998
                                   -----------------------            ----------------------          ----------------------
Quarter           Quarter            High        Low                   High        Low                 High        Low
                  -------            ----        ---                   ----        ---                 ----        ---
<S>                              <C>            <C>                    <C>      <C>                    <C>      <C>
                   First           $1.063      $1.000                  $1.625   $1.438                 $2.500   $1.625
                   Second           ----        ----                    1.500    1.438                  1.750    1.500
                   Third            ----        ----                    1.500    1.469                  1.688    1.563
                   Fourth           ----        ----                    1.469    1.063                  1.563    1.563
</TABLE>

(1)      Includes through March 24, 2000.


We have not declared any common stock dividends and we do not expect to pay such
dividends in the foreseeable  future.  Future dividend policy will be determined
by our Board of Directors based on the conditions  then existing,  including our
financial  condition,  capital  requirements,  cash flow,  profitably,  business
outlook, general economic conditions,  and other factors. Our Board of Directors
currently  anticipates retaining earnings to provide funds for the operation and
expansion of our business.




<PAGE>

Item 6. Selected Financial Data
          (Dollars in thousands, except per share data)

The selected  consolidated  financial data presented below for each of the years
in the  five-year  period ended  December 31, 1999 is derived from the Company's
Consolidated  Financial Statements.  The Consolidated Financial Statements as of
December 31, 1999 and 1998, and for each of the years in the  three-year  period
ended  December  31, 1999 and the  independent  auditors'  report  thereon,  are
included in Item 8 of this Form 10-K.  This data  should be read in  conjunction
with the Consolidated  Financial Statements and Notes thereto included in Item 8
of this Form 10-K.

<TABLE>
<CAPTION>

                                                                              Years Ended December 31,
                                                   ------------------------------------------------------------------------
                                                   -----------    ------------   ------------    -----------    -----------
                                                      1999           1998           1997            1996           1995
                                                   -----------    ------------   ------------    -----------    -----------


CONSOLIDATED STATEMENTS OF
     OPERATIONS DATA:

<S>                                              <C>            <C>            <C>             <C>            <C>
Total revenue and other income                   $    355,526   $     177,553  $      34,011   $          0   $          0
                                                   ===========    ============   ============    ===========    ===========

Operating income (loss)                          $     12,964   $       8,892  $       1,378   $       (359)  $       (265)
Interest expense                                        6,853           4,310          1,045              0              0
                                                   -----------    ------------   ------------    -----------    -----------

Income (loss) from continuing operations
     before income taxes                                6,111           4,582            333           (359)          (265)
Income taxes (benefit)                                  1,731          (7,114)            71              0              0
                                                   -----------    ------------   ------------    -----------    -----------

Income (loss) from continuing operations                4,380          11,696            262           (359)          (265)
Loss from discontinued operations                           0               0         (6,114)        (4,790)        (2,740)
Loss on disposal of discontinued operations                 0               0         (5,792)             0              0
                                                   -----------    ------------   ------------    -----------    -----------

Net income (loss) form continuing operations            4,380          11,696        (11,644)        (5,149)        (3,005)
Preferred stock dividend requirement                   (1,420)              0           (385)          (429)          (175)
                                                   -----------    ------------   ------------    -----------    -----------

Income (loss) to common shareholders             $      2,960   $      11,696  $     (12,029)  $     (5,578)  $     (3,180)
                                                   ===========    ============   ============    ===========    ===========

Basic earnings per share:
Income (loss) from continuing operations         $       0.11   $        0.52  $       (0.01)  $      (0.21)  $      (0.12)
Loss from discontinued operations                        0.00            0.00          (0.55)         (1.27)          0.00
Loss on disposal of discontinued operations              0.00            0.00          (0.52)          0.00           0.00
                                                   -----------    ------------   ------------    -----------    -----------

Net income (loss to) common shareholders         $       0.11   $        0.52  $       (1.08)  $      (1.48)  $      (0.12)
                                                   ===========    ============   ============    ===========    ===========

Diluted earnings per share:
Income (loss) from continuing operations         $       0.10   $        0.49  $       (0.01)  $      (0.21)  $      (0.12)
Loss from discontinued operations                        0.00            0.00          (0.55)         (1.27)         (0.73)
Loss on disposal of discontinued operations              0.00            0.00          (0.52)          0.00           0.00
                                                   -----------    ------------   ------------    -----------    -----------

Net income (loss to) common shareholders         $       0.10   $        0.49  $       (1.08)  $      (1.48)  $      (0.85)
                                                   ===========    ============   ============    ===========    ===========


CONSOLIDATED BALANCE SHEET DATA:

Working capital (deficit)                        $     43,255   $       7,108  $      (5,344)  $     (3,770)  $       (239)
                                                   ===========    ============   ============    ===========    ===========

Total assets                                     $    326,414   $     130,527  $      75,055   $      5,820   $      3,007
                                                   ===========    ============   ============    ===========    ===========
<PAGE>

Long-term debt, capital lease obligations
     and redeemable preferred stock              $    164,325   $      42,463  $      27,652   $          0   $          0
                                                   ===========    ============   ============    ===========    ===========

Redeemable common stock                          $      3,675   $       5,115  $       7,452   $          0   $          0
                                                   ===========    ============   ============    ===========    ===========

Stockholders' equity (deficit)                   $     78,097   $      48,156  $      18,717   $      2,013   $       (234)
                                                   ===========    ============   ============    ===========    ===========
</TABLE>


The Company  discontinued its general parcel and courier business effective June
30, 1997. Accordingly,  we had no revenues from continuing operations until July
11, 1997 with the purchase of Carolina  Pacific and such  revenues  continued to
increase  with the  acquisitions  of four  additional  companies  in  1997,  six
companies in 1998, and eight companies in 1999.



<PAGE>

Item 7. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

You should read the following  discussion in conjunction  with the  Consolidated
Financial  Statements,   including  the  footnotes,  and  understand  that  this
discussion is qualified in its entirety by the foregoing and other more detailed
financial  information   appearing  elsewhere  herein.   Historical  results  of
operations and the percentage  relationships  among any amounts  included in the
Consolidated  Statements  of  Operations,  and any trends which may appear to be
inferable  therefrom,  should not be taken as being  necessarily  indicative  of
trends in operations or results of operations for any future periods.

These and other statements, which are not historical facts, are based largely on
current  expectations  and assumptions of management and are subject to a number
of risks and uncertainties  that could cause actual results to differ materially
from those  contemplated  by such  forward-looking  statements.  Assumptions and
risks  related to  forward-looking  statements  include that we had a history of
operating  losses and we are pursuing a growth  strategy  that relies in part on
the  completion  of  acquisitions  of companies in the  trucking,  logistics and
intermodal  industries;  we will  continue  to price  and  market  our  services
competitively;  conditions  within our  markets  will not change  materially  or
adversely;  the demand for our services will remain  strong;  and we will retain
key managers, drivers and other personnel.

Assumptions  relating to  forward-looking  statements  involve  judgements  with
respect  to,  among  other  things,  future  economic,  competitive  and  market
conditions  and  future  business  decisions,  all of  which  are  difficult  or
impossible  to predict  accurately  and many which are beyond our control.  When
used in this Annual Report, the words "estimates",  "projects", and "expect" and
similar  expressions  are  intended  to  identify  forward-looking   statements.
Although we believe that assumptions  underlying the forward-looking  statements
are reasonable,  any of the assumptions  could prove inaccurate and,  therefore,
there can be no assurance that the results  contemplated in the  forward-looking
information will be realized

Management  decisions  are  subjective  in  many  respects  and  susceptible  to
interpretations  and periodic  revisions based on actual experience and business
developments,  the impact of which may cause us to alter our business  strategy,
which may in turn, affect our results of operations. In light of the significant
uncertainties  inherent in the forward-looking  information included herein, the
inclusion of such information should not be regarded as our representation  that
any strategy,  objectives or other plans will be achieved.  The  forward-looking
statements  contained  in this Annual  Report  speak only as of the date of this
Annual Report,  and we do not have any  obligation to publicly  update or revise
any of these forward-looking statements.

Restructuring  Charge. In connection with companies acquired in 1998 and 1997 we
determined  certain  administrative  positions  were  redundant and accrued $4.2
million  for  severance  related  to the  elimination  of those  positions.  The
liability recorded was charged to the goodwill of the companies acquired. During
1999,  $1 million was paid in cash and an adjustment of $.2 million was recorded
to  reduce  the  liability  with a  corresponding  reduction  in  goodwill.  The
remaining  balance  will  be  paid  through  2003  in  accordance  with  certain
employment contracts.

Early in 1999 the Company  began  formulating a plan to  consolidate  most "back
office  operations"  at its service center in Groveland,  Florida.  The plan was
finalized  during  the  fourth  quarter  of 1999.  The  first  phase of the plan
involves  consolidating  the back office  functions  of the  companies  acquired
during 1999 with a resulting  increase to the purchace  price of $.5 million was
recorded as part of the acquisition costs of the companies  acquired and charged
to goodwill . The employee groups covered were notified during December 1999. As
a result of this plan, a charge of $.5 million which was recorded as part of the
acquisition cost of the companies  acquired and charged to goodwill.  The charge
is intended to cover severance for approximately 100 employees  affected and the
relocation of three  employees to the Groveland  service  center.  The amount of
severance  each  employee is entitled to is based on the years of  employment of
each employee  affected.  The plan is expected to be completed by September 2000
at which time the severance will be paid. Beginning in 2001, the Company expects
the  elimination  of these  positions  will result in annual  pretax  savings of
$1.0-2.0 million.

During the first  quarter of 2000, we finalized a plan to  consolidate  the back
office operations of all remaining  divisions.  In connection with the plan, the
Company  will record a charge to income of between $0.9 million and $1.0 million
during the quarter ending March 31, 2000 to cover severance from the termination
of 55 employees.  Each employee  affected will be entitled to an amount based on
the number of years of employment  with the Company and his position  within the
Company.  We expect the project to be completed  by December  2000 at which time
the severance will be paid. We expect the  elimination  of these  positions will
result in annual pretax savings of $1.0-2.0 million.

Tax Benefit.  On June 25, 1999, new consolidated  return regulations were issued
that changed the rules for using our operating  loss  carryovers by  eliminating
the requirement to apply the separate return limitation loss years limitation to
situations  in which a change of  ownership,  as defined  in Section  382 of the
Internal  Revenue  Code,  occurred  within  six  months of an  acquired  company
becoming a member of a consolidated group.

Prior to this change in the consolidated return regulations,  we had limited the
income tax  benefit  recognized  in the  financial  statements  for  certain net
operating losses of acquired companies by establishing a valuation allowance for
deferred tax assets.

The  Emerging  Issues Task Force  addressed  the  accounting  for  decreases  in
deferred  tax asset  valuation  allowances  established  in a purchase  business
combination as a result of a change in tax  regulations  and reached a consensus
that the change in the valuation amount should be recognized  through  operating
income.

Because the  consensus of the Emerging  Issues Tax Force was released  after our
second quarter's  operating  results were released,  we are restating the second
quarter  of  1999,  to  include  the  benefit  arising  from the  change  in the
consolidated return regulations.

Results of Operations-Historical Results. We discontinued our general parcel and
courier business effective June 30, 1997.  Accordingly,  we had no revenues from
continuing  operations until July 11, 1997 with the purchase of Carolina Pacific
and such revenues continued to increase with the acquisitions of four additional
companies in 1997, six companies in 1998, and eight companies in 1999.



<PAGE>


The following table sets forth items in the Consolidated Statement of Operations
for the year ended December 31, 1999, 1998 and 1997 as a percentage of operating
revenues.
<TABLE>
<CAPTION>

                                                                          Percentage of
                                                                        Operating Revenues
                                                                           December 31,


                                                            1999              1998              1997
                                                        --------------    -------------    ---------------
<S>                                                        <C>               <C>              <C>
Total operating  revenue                                   100.00%           100.00%          100.00%
                                                        --------------    -------------    ----------------

Purchased transportation                                    36.93             43.58            46.11
Salaries, wages and benefits                                25.76             22.91            21.94
Fuel                                                         8.96              7.29             7.64
Operating supplies and expenses                             11.02              9.21             9.00
Lease expense - revenue equipment                            5.75              3.41              .63
Insurance                                                    1.35              1.60             2.49
Depreciation and amortization expense                        3.90              4.23             4.73
General and administrative expense                           2.69              2.76             3.41
                                                        --------------    --------------   ---------------
Total expenses                                              96.36             94.99            95.95
                                                        --------------    -------------    ----------------
  Operating income                                           3.64              5.01             4.05
Interest expense                                             1.92              2.42             3.07
                                                        --------------    -------------    ----------------
  Income before income taxes                                 1.72              2.59              .98
Income taxes (benefit)                                        .49             (4.01)             .21
                                                        --------------    -------------    ----------------

  Net income                                                 1.23              6.60              .77

Preferred dividend requirement                               (.40)            ----              ----
                                                        --------------     -------------    ----------------

Income available to common shareholders                       .83%             6.60%             .77%
                                                        ==============    =============    ================
</TABLE>


Year ended December 31, 1999 vs. 1998

Total operating revenues.  Total operating revenue increased from $177.6 million
in 1998 to  $355.5million,  or 100.2% in 1999.  The increase is due primarily to
the acquisition of eight  companies in 1999 ($123.8  million) and a full year of
revenues for those companies acquired in 1998.

Purchased transportation.  Purchased transportation increased from $77.3 million
in 1998 to $131.3  million or 69.7% in 1999. As a percentage of total  operating
revenue,  purchased  transportation  decreased  from 43.58% in 1998 to 36.93% in
1999.  Changes in the fleet mix from  brokerage and  owner-operators  to company
owned trucks as a result of the acquisitions resulted in the decline in purchase
transportation as a percentage of sales.

Salaries, wages and benefits.  Salaries, wages and benefits increased from $40.7
million  in 1998 to $91.6  million,  or  125.2%  in 1999.  Salaries,  wages  and
benefits as a percentage of total  operating  revenue  increased  from 22.91% in
1998 to 25.76% in 1999. The increase as a percentage of total operating  revenue
is attributed to the change in revenue mix discussed in the preceding  paragraph
as well as  continued  pressure  on  driver  wages as well as the  growth of our
corporate services area. Should driver wages continue to increase as a result of
the  industry-wide  driver shortage,  there can be no assurance that these costs
can be passed along through increased freight rates.

Fuel.  Fuel increased from $12.9 million in 1998 to $31.9 million,  or 146.4% in
1999.  Fuel as a percentage of total operating  revenue  increased from 7.29% in
1998 to 8.96% in 1999.  In addition to the change in fleet mix,  fuel costs have
increased  approximately  37% over the prior year. Should fuel costs stay at the
levels experienced in the fourth quarter of 1999, or increase further, we do not
believe we can transfer all of these higher costs to our customers. As a result,
future operations could be negatively impacted.

Operating supplies and expenses.  Operating supplies and expenses increased from
$16.4 million in 1998 to $39.2 million,  or 139.6%,  in 1999. As a percentage of
total operating revenue operating  supplies and expenses increased from 9.21% in
1998 to 11.0% in 1999. The increase as a percentage of total  operating  revenue
is attributed to the change in mix of company equipment and owner operators.

Insurance.  Insurance  expense  increased  from  $2.8  million  in  1998 to $4.8
million, or 68.8%, in 1999. Insurance expense as a percentage of total operating
revenue  decreased  from  1.60%  in 1998 to 1.35% in  1999.  The  decrease  as a
percentage of total  operating  revenue is due to our ability to negotiate  more
favorable insurance rates because of our larger, more diverse insurance base.

Lease  expense.  Lease  expense  increased  from $6.1  million  in 1998 to $20.4
million in 1999,  an  increase of 237.4%.  Expressed  as a  percentage  of total
operating revenue,  lease expense increased from 3.41% in 1998 to 5.75% in 1999.
The increase is a result of our fully utilizing our $50 million  operating lease
facility.

Depreciation and  amortization  expense.  Depreciation and amortization  expense
increased  from  $7.5  million  in 1998 to $13.9  million,  or  84.3%,  in 1999.
Depreciation and amortization expense as a percentage of total operating revenue
decreased  from 4.23% in 1998 to 3.90% in 1999.  The decrease as a percentage of
total operating  revenue is due to the increased use of leased  equipment offset
by higher  levels of goodwill  amortization  ($1.2 million in 1998 compared with
$1.8 million in 1999.)

General and administrative expense. General and administrative expense increased
from  $4.9  million  in 1998 to $9.5  million,  or 94.3% in  1999.  General  and
administrative expense as a percentage of total operating revenue decreased from
2.76% in 1998 to 2.69% in 1999. The decrease as a percentage of total  operating
revenue is related to the ongoing consolidation of certain accounting,  finance,
legal and administrative functions.

Operating income.  Operating income increased from $8.9 million in 1998 to $13.0
million,  or  45.8%,  in  1999.  As a  percentage  of total  operating  revenue,
operating income declined from 5.01% in 1998 to 3.64% in 1999 as a result of the
various factors discussed above.

Interest  expense.  Interest expense increased from $4.3 million in 1997 to $6.9
million,  or  59.0%,  in  1999  as a  result  of  increased  borrowings  to fund
acquisitions  offset by more  favorable  interest rates and the increased use of
leased equipment.  Expressed as a percentage of total operating revenue interest
expense declined from 2.42% in 1998 to 1.93% in 1999.

Income  taxes.  In 1998, we  recognized  the future value of net operating  loss
carryforwards by reducing the valuation allowance in the amount of approximately
$7.5 million. Due to non-deductible  goodwill, and the non-deductible portion of
per diems  paid to  drivers we have  incurred  a tax rate of  approximately  50%
(before the  utilization  of any net operating  losses.) In the first quarter of
2000,  we  discontinued  per diems.  As a result,  our tax rate is  expected  to
decline in 2000. In 1999, as a result of changes in Federal tax laws, we reduced
the valuation  allowance for net operating loss  carryforwards  and recognized a
benefit of $2.7 million.  The Company recognized this benefit effective June 30,
1999. As a result the June 1999 quarter will be restated to reflect the adoption
of this policy.

Income per diluted common share. Amounts available to common  shareholders,  per
diluted common share,  decreased from income of $.49 per diluted common share to
$.11 in 1999 because of the factors noted above.

Weighted  average  number of diluted  common  shares  outstanding.  The weighted
average number of diluted common shares outstanding increased as a result of the
shares issued for our various acquisitions.

Weighted average number of basic common shares outstanding. The weighted average
number of basic common  shares  outstanding  increased as a result of the shares
issued for our various  acquisition.  The convertible  preferred  shares are not
included in the diluted common shares because the effect would be anti-dilutive.

Year ended December 31, 1998 vs. 1997

Total operating revenue. Total operating revenue increased from $34.0 million in
1997 to $177.6 million, or 422.0%, in 1998. The increase is due primarily to the
acquisition of six companies in 1998 ($93.0 million) and a full year of revenues
for those companies acquired in 1997 ($50.6 million).

Purchased transportation.  Purchased transportation increased from $15.7 million
in 1997 to $77.4  million,  or 393.3%  in 1998.  Purchased  transportation  as a
percentage of total operating revenue decreased from 46.11% in 1997 to 43.58% in
1998.  The  acquisitions  caused a change in the fleet  mix from  brokerage  and
owner-operators  to company owned trucks and resulted in the decline in purchase
transportation as a percentage of sales.

Salaries,  wages and benefits.  Salaries, wages and benefits increased from $7.5
million in 1997 to $40.7 million,  or 445.2%,  in 1998. As a percentage of total
operating revenue, salaries, wages and benefits increased from 21.94% in 1997 to
22.91% in 1998.  The  increase as a  percentage  of total  operating  revenue is
attributed to the change in revenue mix discussed in the preceding  paragraph as
well as continued pressure on driver wages.

Fuel. Fuel increased from $2.6 million in 1997 to $12.9 million,  or 397.8%,  in
1998. As a percentage of total operating  revenue,  fuel decreased from 7.64% in
1997 to 7.29% in 1998. Fuel costs as a percentage of total revenues decreased as
a result of lower fuel prices,  our ability to  negotiate  more  favorable  fuel
contracts  and improved gas mileage  from the  purchase of new,  more  efficient
equipment.

Operating supplies and expenses.  Operating supplies and expenses increased from
$3.0 million in 1997 to $16.4 million,  or 434.4%, in 1998.  Operating  supplies
and expenses as a percentage of total operating  revenue increased from 9.00% in
1997 to 9.21% in 1998.  The increase as a percentage of total revenues and other
income is attributed  to the change in mix of brokerage  and owner  operators to
company trucks and the increased use of leased equipment.

Lease  expense.  During  1998,  we entered  into a $50 million  operating  lease
facility.  As a result  lease  expense  increased  $5.8  million from prior year
levels.  As a percent of total  operating  revenue lease expense  increased from
 .63% to 3.41%.

Insurance. Insurance expense increased from $.9 million in 1997 to $2.8 million,
or 236.2%, in 1998. Insurance expense as a percentage of total operating revenue
decreased  from 2.49% in 1997 to 1.60% in 1998.  The decrease as a percentage of
total  operating  revenue is due to our  ability  to  negotiate  more  favorable
insurance rates because of its larger, more diverse insurance base.

Depreciation and  amortization  expense.  Depreciation and amortization  expense
increased  from  $1.6  million  in 1997 to $7.5  million,  or  366.9%,  in 1998.
Depreciation and amortization expense as a percentage of total operating revenue
decreased  from 4.73% in 1997 to 4.23% in 1998.  The decrease as a percentage of
total operating revenue is due to the increased use of leased equipment.

General and administrative expense. General and administrative expense increased
from $1.2  million in 1997 to $4.9  million,  or 323.6%,  in 1998.  General  and
administrative expense as a percentage of total operating revenue decreased from
3.41% in 1997 to 2.76% in 1998. The decrease as a percentage of total  operating
revenue is related to the ongoing consolidation of certain accounting,  finance,
and legal administrative functions.

Operating  income.  Operating income increased from $1.4 million in 1997 to $8.9
million, or 544.8%, in 1998. Operating income as a percentage of total operating
revenue increased from 4.05% in 1997 to 5.01% in 1998 as a result of the various
factors noted above.

Interest  expense.  Interest expense increased from $1.0 million in 1997 to $4.3
million,  or  312.4%,  in 1998  as a  result  of  increased  borrowings  to fund
acquisitions  offset by more  favorable  interest rates and the increased use of
leased equipment.

Income taxes. Income taxes attributable to continuing  operations decreased from
a  provision  of  $70,665  in 1997 to a benefit  of $7.1  million  in 1998 as we
recognized the future value of net operating loss carryforwards.

Income  (loss)  to common  shareholders.  Income  (loss) to common  shareholders
increased  from a loss of $12.0  million  in 1997 to income of $11.7  million in
1998  because  of the  various  factors  noted  above and the sale of the parcel
delivery business in 1997.

Income (loss) per diluted  common share.  Income (loss) per diluted common share
increased  from a loss of $1.08 per diluted  common share to income of $0.49 per
diluted common share because of the factors noted above.

Income  (loss) per basic  common  share.  Income  (loss) per basic  common share
increased  from a loss of $1.08  per  basic  common  share to income of $.52 per
basic common share because of the factors noted above.

Weighted  average  number of basic and diluted  common shares  outstanding.  The
weighted average number of basic and diluted common shares outstanding increased
as a result of the shares issued for the various acquisitions by us.



<PAGE>


Results of Operations - Unaudited Pro Forma results year ended December 31, 1999
compared with the year ended December 31, 1998

Since  July  1997,  we  have  acquired  19  truckload  carriers.  Combining  the
purchasing  power of these  companies  has  enabled us to reduce  certain  costs
particularly  in the areas of insurance,  interest and leasing costs,  fuel, and
overhead. Our strategy is to allow the acquired companies to focus on marketing,
customer service,  and operations while  administrative  and financial costs are
centralized in the Corporate Services Division of Transit Group  Transportation,
LLC.

The unaudited pro forma financial  information reflects the operations of the 19
acquired  companies  as if they all had been  acquired  on January 1, 1998.  The
following  adjustments  were  made to the  historical  financial  statements  of
acquired companies prior to their acquisition by us:

o Reduced  depreciation  expense  due to changes in  depreciation  policies  and
  estimated  lives;
o Amortization  of goodwill  recorded in connection  with the
  acquisitions;
o Recognition of lease expense incurred in connection with certain
  sale-lease back transactions;
o Additional  interest costs for the cash portion
  of the acquisition  costs;
o Interest costs of the acquired  companies have been
  adjusted to reflect our financing costs; and
o Provision for income taxes at our
  estimated annual rates.
o Excluded the impact of the change in the valuation  allowance for deferred tax
  assets.

No  projected  provision  for  cost  reductions  (such as  insurance,  overhead,
purchasing, and fuel) have been reflected in the historical financial statements
of the subsidiaries from January 1, 1998 through the date of acquisition.



<PAGE>
<TABLE>
<CAPTION>


Unaudited Results of Operations - Year Ended December 31, 1999 vs. Year Ended
December 31, 1998

                              Unaudited Pro Forma Combined Results of Operations
                                         (In thousands except share data)

                                                                                Year ended
                                                  ---------------------------------------------------------------------
                                                         December 31, 1999                    December 31, 1998
                                                  ---------------------------------    --------------------------------
                                                         $                 %                  $                 %
                                                  ----------------    -------------    ----------------    ------------


<S>                                                 <C>                    <C>        <C>                       <C>
Operating revenues                                  $     493,968         100%       $         468,156        100%
                                                  ----------------    -------------    ----------------    ------------

Operating expenses                                        439,396          88.95               402,650         86.01
Depreciation and amortization                              21,915           4.44                24,350          5.20
General and administrative expenses                        12,242           2.48                13,584          2.90
                                                  ----------------    -------------    ----------------    ------------

Total operating expenses                                  473,553          95.87               440,584          94.11
                                                  ----------------    -------------    ----------------    ------------
   Operating income                                        20,415            4.13               27,572           5.89

Interest expense                                           11,285            2.28               13,735           2.93
                                                  ----------------    -------------    ----------------    ------------
   Income before income taxes                               9,130            1.85               13,837           2.96

Income taxes                                                4,566             .93                6,694           1.43
                                                  ----------------    -------------    ----------------    ------------

   Net income
                                                  $         4,564            .92%       $        7,143         1.53%
                                                  ================    =============    ================    ============



 Income per basic common share                    $        .14                          $      .22
                                                  ================                     ================



 Income per diluted common share                  $        .14                          $      .21
                                                  ================                     ================

Weighted average number of basic common shares
outstanding                                            31,887,857                           32,194,435
                                                  ================                     ================

Weighted average number of diluted common
shares outstanding                                     32,743,056                           33,449,366
                                                  ================                     ================
</TABLE>

Comparable  revenues  (excluding  the  impact  of  Transit  Leasings'  warehouse
operation)  increased by 6.0% in 1999 over 1998 levels reflecting our successful
efforts to expand existing customer relationships  throughout the Transit Group.
Pro forma depreciation and interest expense declined from year ago periods as we
utilized our $50 million  operating  lease  facility.  Conversely,  higher lease
costs are reflected in 1999 operating expenses which exceed prior year levels.

Pro forma general and administrative expenses declined over prior year levels as
we  continued  the  consolidation  of our back  office  functions.  In 2000 this
consolidation  process has been  accelerated  which may cause these  expenses to
increase in the near term and decrease as duplicate  functions and personnel are
eliminated.

Pro forma  operating  income is lower in 1998 because certain of those companies
acquired in 1999 are not performing at the levels  anticipated  at  acquisition,
and fuel costs have increased  significantly over the prior year.

<PAGE>

The impact of pro forma,  non-deductible  goodwill amortization,  non-deductible
per diem costs and  pre-acquisition  losses  incurred by the acquired  companies
caused an increase in our effective income tax rate. Per diems were discontinued
in March 2000. It is anticipated  that our actual  effective  income tax rate in
the future will approximate 40%.

New  Accounting  Pronouncements.  In  June  1998,  the  FASB  issued  SFAS  133,
"Accounting  for  Derivative  Instruments  and  Hedging  Activies."  SFAS 133 is
effective for all fiscal  quarters of all fiscal years  beginning after June 15,
2000.  SFAS 133  requires  that all  derivative  instruments  be recorded on the
balance  sheet at fair  value.  Changes  in the fair  value of  derivatives  are
recorded  each  period  in  current  earnings  or  other  comprehensive  income,
depending on whether a derivative is  designated as part of a hedge  transaction
and, if it is,  depending on the type of hedge  transaction.  The accounting for
this  standard  is not  expected  to have a  material  impact  on the  company's
financial statements.

Liquidity and Capital Resources.  Our acquisition  strategy and requirements for
replacing our revenue equipment require significant capital resources.

In July 1997,  an affiliate of our Chairman  loaned us $4 million to  consummate
the acquisition of Carolina Pacific Distributors,  Inc. During August, September
and October of 1997, the affiliate  loaned us an additional $2.6 million to fund
the continuing operations of the parcel delivery and courier operations and fund
certain expenses associated with the acquisition of the truckload companies.  Of
the $6.6  million  borrowed,  $2.6  million was assumed by the  purchaser of the
parcel  delivery  and courier  operations,  leaving a balance of $4 million.  We
repaid $0.5  million in the fourth  quarter of 1998 and $.5 million in the first
quarter of 1999.  In March 1999,  we borrowed an  additional  $1 million from an
affiliate  of the  Chairman.  All of these  loans  were  paid off in the  fourth
quarter of 1999.

In November 1998, we increased the capacity of our revolving line of credit with
AmSouth Bank from $20 million to $30 million.  The facility  bore  interest at a
rate of 2.25% over LIBOR and was secured by accounts  receivable.  This facility
was paid off with proceeds from our new credit facility.

Concurrent with expanding its credit facility,  we converted $5 million of debt,
which was due in 1999, to a term facility  which  amortized over seven years and
had a final maturity in January 2002. The loan was cross-collateralized with the
$30 million facility discussed above.

Also in November  1998, we entered into a $50 million  equipment  lease facility
with a  commercial  lender.  The facility  was  available  to refinance  certain
existing  equipment and the remainder to support future  equipment  leases.  The
terms of the leases  vary from 30-48  months  for used  equipment,  and up to 60
months for new equipment.  Initial  fundings under the facility bore interest at
rates between 5.50% and 6.00%. Interest rates on future fundings were subject to
changes in the 3-year U.S.  Treasury  interest  rates.  At the expiration of the
lease, we may renew the lease,  return the equipment subject to the payment of a
Terminal Rate Adjustment Clause or purchase the equipment. At December 31, 1999,
this facility was fully utilized.

In October  1999,  we entered  into a new $150  million  credit  facility  which
replaced  our $35 million  revolving  credit and term  facility.  The new credit
facility is comprised  of a $110  million  working  capital  revolver,  which is
secured by receivables and equipment,  and a $40 million acquisition credit. The
revolver is interest only with a 5-year term. The acquisition credit is interest
only for one year at which  time it  converts  to a 4-year  term  facility  with
quarterly  principal  payments.  Both  the  working  capital  revolver  and  the
acquisition  component bear interest at LIBOR plus 2% through December 31, 1999,
at which time the spread over LIBOR will be determined by our financial  ratios.
At December 31, 1999,  $7.0  million was  available  under the working  capital
revolver and $30.0 million under the acquisition facility.

The facility contains customary  financial covenants that include limitations on
dividends,  indebtedness,  mergers, sale of assets, and the repurchase of common
stock.  Requirements  exist to maintain  minimum  levels of coverage for a Fixed
Charge Coverage  Ratio,  Asset Coverage Ratio,  and a Minimum  Consolidated  Net
Worth (all defined). We were in compliance with all covenants with the exception
of the Fixed  Charge  Coverage  Ratio at December 31,  1999.  This  covenant was
waived at that date and we believe that this covenant will be maintained  during
2000. Accordingly, the credit facility remains classified according to the terms
of the agreement.

In May 1999,  GE Equity (the  private  equity arm of GE Capital)  purchase  five
million  shares of 9%  Redeemable  Preferred  Stock for  $5.00 per  share.  Each
Redeemable  Preferred  Share may be converted at any time,  at the option of the
preferred  shareholder,  for one  share  of our  common  stock.  The  Redeemable
Preferred Stock agreement contains certain anti-dilutive  provisions which would
require the issuance of additional  Redeemable  Preferred Shares if we issue any
of our common stock at less than $5.00 per share. Beginning three years from the
date of issuance (and for the succeeding two years) of the Redeemable  Preferred
Shares,  the preferred  shareholders can cause us to purchase up to 33% per year
of the outstanding  Redeemable Preferred Stock for $5.00 per share. In addition,
certain   events  such  as  a  change  in  control  would  allow  the  preferred
shareholders to redeem all of the outstanding Redeemable Preferred Stock.

The Company is required to provide  financial  information and maintain  certain
financial   conditions.   The   conditions   involve   limitations  on  mergers,
acquisitions,  asset  sales,  and  additional  indebtedness.  The Company was in
compliance of all of requirements of this Agreement.  Should an Event of Default
occur and  remain,  the  holders of the  Preferred  Stock will have the right to
elect two members to the Board of Directors of the Company.

In 1998, we recognized the future value of net operating loss  carryforwards  by
reducing the valuation  allowance in the amount of  approximately  $7.5 million.
Due to non-deductible goodwill, and the non-deductible portion of per diems paid
to  drivers  we have  incurred  a tax  rate of  approximately  50%  (before  the
utilization  any  net  operating  looses.  In  the  first  quarter  of  2000  we
discontinued  per diems.  As a result,  our tax rate is  expected  to decline in
2000.  In 1999,  as a result of  changes  in Federal  tax laws,  we reduced  the
valuation  allowance  for net  operating  loss  carryforwards  and  recognized a
benefit of $2.7 million of net operating loss benefits of companies  acquired in
1997 and 1999. The Company recognized this benefit effective June 30, 1999. As a
result the June 1999  quarter  will be restated to reflect the  adoption of this
policy.

In 1999, 1998, and 1997 cash (deficit) flow from operating activities was $(8.0)
million, $8.4 million, and $.1 million,  respectively,  and capital expenditures
were $21.6 million, $7.1 million and $.2 million,  respectively,  for new trucks
and trailers.  The first and fourth quarters are typically the weakest  quarters
in the fiscal  year.  In the fourth  quarter of 1999,  higher fuel costs and the
poor performance by certain of our 1999 acquisitions  resulted in a loss for the
quarter.  Tags, plates and permits require  significant cash payments during the
first quarter of each year.  The cash  required to fund our growth  strategy and
the capital  requirements  for new equipment is  significant.  In addition,  our
internal  growth has required us to finance a  significant  increase in accounts
receivable.  These factors have combined to negatively  impact our cash flow. We
expect that the seasonal increase in business and the continued concentration on
collection of accounts receivable will alleviate these cash constraints. Capital
expenditures for 2000 are expected to range from $36.0-$40.0 million and will be
financed under our existing  credit  facility and by other  commercial  lenders.
Amounts  available from future cash flows and funds  available  under our credit
facilities should be sufficient to meet our expected operating needs and planned
capital  expenditures  for the  foreseeable  future.  However,  there  can be no
assurance  that  we can  continue  to  finance  our  business  strategy  through
operations or commercial lenders.

Redemption Rights for Selling  Shareholders in Acquisitions.  In connection with
the acquisitions of Capitol Warehouse,  Service Express,  and Carroll Fulmer, we
granted the selling  shareholders the right to require us to redeem a portion of
the shares which they received in exchange for selling  their  businesses to us.
The dollar  amount of stock  subject to mandatory  redemption  by us  aggregated
approximately $8.1 million upon acquisition of those companies.

At December 31, 1999,  holders of redemption rights with respect to $3.7 million
of stock may require  either us to redeem the stock or our major  shareholder to
acquire the stock at a price of $3.60 per share.  Holders of  redemption  rights
with  respect  to $1.4  million  of stock at  $3.875  per share had the right to
require us to redeem their shares,  which was guaranteed by a major shareholder.
These shares were either sold by the  shareholder or acquired by us in the first
quarter of 1999.

To the extent such redemption rights are exercised,  we will be required to fund
the cash required to meet our obligations under the redemption rights by drawing
on bank lines  which may be  available  or to call upon a major  shareholder  to
purchase  the  stock  under  such   shareholder's   obligations  and  guarantees
associated with the acquisition contracts.

Year 2000.  During  1999,  we  identified  our  critical  systems  for Year 2000
compliance and invested  approximately  $250,000 to assure that our systems were
Year 2000 compliant. To date we have not experienced any disruptions that relate
to the year 2000.

Risk Factors

Accumulated Deficit

We incurred  substantial  operating losses and cash flow deficits from inception
through 1997. In the fourth quarter of 1999 we incurred a net loss. There can be
no assurance  that we can sustain  consistently  profitable  operations or raise
additional external capital funding.

Debt Covenants

Our  credit  facility  contains  customary   financial  covenants  that  include
limitations  on  dividends,  indebtedness,  mergers,  sale  of  assets,  and the
repurchase of common stock.  Requirements  exist to maintain  minimum  levels of
coverage for a Fixed Charge  Coverage  Ratio,  Leverage  Ratio,  Asset  Coverage
Ratio, and Minimum  Consolidated Net Worth (all defined).  We were in compliance
with all  covenants  with the  exception of the Fixed Charge  Coverage  Ratio at
December 31,1999. This covenant was waived at that date and we believe that this
covenant  will be  maintained  during  2000.  Accordingly,  the credit  facility
remains classified according to the terms of the agreement.

Competition

The  trucking  industry is extremely  competitive  and  fragmented.  Some of the
trucking companies with which we compete have greater financial  resources,  own
more  revenue  equipment  and carry a larger  volume of freight than us. We also
compete with other motor carriers for the services of drivers.

Management of Growth

We  completed  the  acquisition  of 19 operating  companies  from June 30, 1997,
through March 24, 2000, and may acquire additional companies in the near future.
The  growth  of our  business  and  expansion  of our  operations  has  placed a
significant strain on our administrative,  operational and financial  resources.
Our recent growth has also  resulted in a substantial  increase in the number of
our employees and the scope of our operations. Our inability to assimilate these
newly  acquired  operations  and support the growth of our business would have a
material adverse effect on our financial condition and results of operations.

Shares Available for Resale

Some  of our  presently  outstanding  common  stock  may be  deemed  "restricted
securities"  and may be sold in compliance  with Rule 144 adopted under the 1933
Act.  Sales under Rule 144 may have a  depressive  effect on the market price of
our common stock.

Fuel Prices

A major cost of our operation is diesel fuel.  Since December 1998,  fuel prices
have  increased  approximately  37%.  We are not able to pass all of these costs
along to our  customers.  Should  fuel  cost  stay at this  level,  or  increase
further, we believe that our profits may decline.

No Intent to Pay Dividends

We have not paid any dividends on our common stock and intend to follow a policy
of  retaining  all of our  earnings,  if any,  to finance  the  development  and
expansion of our business.

Continued NASDAQ Listing; Liquidity


Our common stock is currently listed on the NASDAQ SmallCap Market. There can be
no  assurance  that we will  continue to meet the  requirements  to maintain our
NASDAQ listing. If our common stock were no longer quoted on NASDAQ,  holders of
common stock may have greater difficulty  identifying  potential  purchasers for
their securities. This reduced liquidity could adversely affect the market value
of our common stock.

Volatility of Stock Price.

The market  price of the common stock may be  significantly  affected by factors
such as announcements of our proposed acquisitions, as well as variations in our
results of operations and market  conditions.  The price may also be affected by
market movements in prices of stocks in general.  There is no assurance that the
current market price for the common stock will be maintained.

Control by Principal Shareholders, Directors and Officers

T. Wayne Davis,  our Chairman of the Board and his  affiliates  currently  own a
significant  number of shares of our voting  stock.  As a result,  he is able to
influence  or  control  substantially  all  matters  requiring  approval  of our
shareholders, including the election of directors.

Potential Liability

Potential liability associated with accidents in the trucking industry is severe
and occurrences are  unpredictable.  The industry is also subject to substantial
workers'  compensation expense. A material increase in the frequency or severity
of accidents or workers' compensation claims or the unfavorable determination of
existing claims and pending  litigation can be expected to adversely  affect our
operating  income and  financial  condition.  We believe that we have  insurance
coverage sufficient to cover most expected losses.






<PAGE>


Item 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Our exposure to interest  rates relate  primarily  to our cash  equivalents  and
certain debt  obligations.  Any interest  earned on cash is recorded as interest
income on our statements of operations.

We do not trade in  derivative  financial  instruments,  nor do we engage in any
foreign currency trading activities.

Our line of credit bears interest at the rate of LIBOR (London Interbank Offered
Rate) plus 2.00%.  LIBOR is subject to various  pressures from various  economic
factors.  Currently,  we do not hedge against  interest rate increases nor do we
limit  interest  rate  declines.  At  December  31,  1999 we had  $88.3  million
outstanding under our credit facility.

Fuel costs  represents  approximately  9% of our revenue.  During 1999 worldwide
demand for fuel  increased  and the OPEC nations  began  limiting  supply.  As a
consequence,  our fuel prices have  increased  approximately  37% over the prior
year and have continued to increase in the first quarter of 2000.  Each $.10 per
gallon  increase  in the  cost  of  fuel  would  decrease  operating  income  by
approximately  $250,000  per month to the extent  these  increases  could not be
passed on to our customers.  Presently, we have no hedges on fuel prices and are
subject to fluctuations caused by demand issues and OPEC restrictions.

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information called for by this Item begins on page 27 of this Form 10-K.


Item  9.  CHANGES  IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
FINANCIAL DISCLOSURE

None.










<PAGE>


                              PART III

Item 10. DIRECTORS, AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information  regarding  directors  contained under the caption  "Election of
Directors  - Nominees"  in our Proxy  Statement  for the 2000 Annual  Meeting of
Shareholders is incorporated herein by reference.

The  information  regarding  executive  officers  contained  under the  caption:
"Executive  Officers"  in our Proxy  Statement  for the 2000  Annual  Meeting of
Shareholders is incorporated herein by reference.

Item 11. EXECUTIVE COMPENSATION

The information  contained under the caption  "Election of Directors - Executive
Compensation" in our Proxy Statement for the 2000 Annual Meeting of Shareholders
is incorporated herein by reference.

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information  contained  under the caption  "Voting  Securities and Principal
Holders Thereof - Security  Ownership of Certain Beneficial Owners" in our Proxy
Statement for the 1999 Annual Meeting of Shareholders is incorporated  herein by
reference.

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information contained under the caption "Certain  Transactions" in our Proxy
Statement for the 2000 Annual Meeting of Shareholders is incorporated  herein by
reference.
























<PAGE>



                              PART IV

Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)      Exhibits required by Item 601, Regulation S-K

      3.  Articles of Incorporation and By-Laws

         3.1      Amended and Restated  Articles of Incorporation  (incorporated
                  by  reference  from Exhibit 3.1 to the  Registrant's  Form 8-K
                  dated May 17, 1999).

         3.2      Amendment to Amended and Restated  Articles of  Incorporation,
                  (incorporated  by reference  from Exhibit 3.1 to  Registrant's
                  Form 8-K filed on June 10, 1999).

         3.3      Certificate   of   Designation,   Preferences   and  Relative,
                  Participating,  Optional and Other Special Rights of Preferred
                  Stock and Qualifications, Limitations and Restrictions thereof
                  (Incorporated  by  reference  from Exhibit 3.2 to the Form 8-K
                  dated June 10, 1999)

     4.  Instruments defining the Rights of Security holders

         4.1      Specimen  Stock  Certificate  (incorporated  by reference from
                  Exhibit  4.1  to  Registrant's  Form  S-18,  Registration  No.
                  33-30123A).

         4.2      Warrant  granting  stock  purchase  warrants  to J. Ray Gatlin
                  (incorporated   by   reference   from   Exhibit   4.2  to  the
                  Registrant's Form S-18, Registration No. 33-30123A).

         4.3      Warrant  granting  stock  purchase  rights to T.  Wayne  Davis
                  (incorporated  by reference  from Exhibit 4.3 to  Registrant's
                  Form S-18, Registration No. 33-30123A).

         4.4      Warrant  granting  stock  purchase  rights to T.  Wayne  Davis
                  (incorporated  by reference  from Exhibit 4.4 to  Registrant's
                  Form S-18, Registration No. 33-30123A).

         4.5      Warrant  granting  stock  purchase  rights  to Drue B.  Linton
                  (incorporated  by reference  from Exhibit 4.5 to  Registrant's
                  Form S-18, Registration No. 33-30123A).

         4.6      Warrant  granting stock  purchase  rights to Steven C. Koegler
                  (incorporated  by reference  from Exhibit 4.7 to  Registrant's
                  Form S-18, Registration No. 33-30123A).

         4.7      Warrant  granting  stock  purchase  rights  to J.  Ray  Gatlin
                  (incorporated  by reference  from Exhibit 4.8 to  Registrant's
                  Form S-18, Registration No. 33-30123A).

         4.8      Form of Warrant issued (incorporated by reference from Exhibit
                  4.9 to Registrant's Form S-18, Registration No. 33-30123A).

         4.9      Form of Warrant  between the Company and  American  Transtech,
                  Inc., as Warrant Agent (incorporated by reference from Exhibit
                  4.10 to Registrant's Form S-18, Registration No. 33-30123A).

         4.10     Preferred   Stock   Purchase   Agreement  and  specimen  stock
                  certificate   between   the   Company   and  T.  Wayne   Davis
                  (incorporated by reference from Exhibit Z to Registrant's 1993
                  Form 8-K).

    10.  Material Contracts

         10.1     Incentive  Stock Option Plan  (incorporated  by reference from
                  Exhibit  10.2 to  Registrant's  Form  S-18,  Registration  No.
                  33-30123A).

         10.2     Termination of Lease Agreements between Transit Leasing,  Inc.
                  (formerly known as Capitol  Warehouse,  Inc.) and Jerry W. and
                  Anna Pennington dated February 9, 1999.

         10.3     Agreement and Plan of  Reorganization  dated as of May 5, 1998
                  governing the merger of Certified Transport,  Inc. and Venture
                  Logistics,  Inc. and a wholly-owned  subsidiary of the Company
                  (incorporated  by reference  from Exhibit 2.6 to  Registrant's
                  Form 8-K dated May 5, 1998).

         10.4     Agreement and Plan of Reorganization dated as of June 16, 1998
                  governing   the  merger  of  K.  J.   Transportation   with  a
                  wholly-owned   subsidiary  of  the  Company  (incorporated  by
                  reference from Exhibit 2.6 to Registrant's Form 8-K dated June
                  17, 1998).

         10.5     Promissory  Note for  $2,645,451.00  dated as of November  12,
                  1998, by and among General  Electric  Capital  Corporation and
                  certain    wholly-owned    subsidiaries    of   the   Company.
                  (Incorporated   by   reference   from   Exhibit   10.24  to
                  Registrant's Form 10-K dated March 31, 1999).

         10.6     Master Lease  Agreement  dated as of November 12, 1998, by and
                  among General  Electric  Capital  Corporation,  Transit Group,
                  Inc.  and certain  wholly-owned  subsidiaries  of the Company.
                  (Incorporated   by   reference   from   Exhibit   10.25  to
                  Registrant's Form 10-K dated March 31, 1999).

         10.7     Corporate Guaranty dated as of November 12, 1998, by and among
                  General Electric Capital Corporation and certain  wholly-owned
                  subsidiaries of the Company.  (Incorporated  by reference from
                  Exhibit  10.26 to  Registrant's  Form 10-K  dated  March 31,
                  1999).

         10.8     Master  Security  Agreement  dated as of November 12, 1998, by
                  and among General  Electric  Capital  Corporation  and certain
                  wholly-owned  subsidiaries  of the Company.  (Incorporated  by
                  reference from Exhibit 10.27  to Registrant's Form 10-K dated
                  March 31, 1999).

         10.9     Loan  Agreement  and  Security  Agreement  for a $1.5  million
                  facility dated as of November 5, 1998, by and between  AmSouth
                  Bank and the Company.  (Incorporated by reference from Exhibit
                  10.28  to Registrant's Form 10-K dated March 31, 1999).

         10.10    Unconditional  guarantee for a $1.5 million  facility dated as
                  of November 5, 1998,  by and between  AmSouth Bank and certain
                  wholly-owned  subsidiaries  of the Company.  (Incorporated  by
                  reference from Exhibit 10.29  to Registrant's Form 10-K dated
                  March 31, 1999).

         10.11    Promissory Note for $1.5 million dated as of November 5, 1998,
                  by and among  AmSouth Bank and the Company.  (Incorporated  by
                  reference from Exhibit 10.30  to Registrant's Form 10-K dated
                  March 31, 1999).

         10.12    Loan  Agreement  and  Security  Agreement  for a $3.5  million
                  facility dated as of November 5, 1998, by and between  AmSouth
                  Bank and the Company.  (Incorporated by reference from Exhibit
                  10.31  to Registrant's Form 10-K dated March 31, 1999).

         10.13    Unconditional  guarantee for a $3.5 million  facility dated as
                  of November 5, 1998,  by and between  AmSouth Bank and certain
                  wholly-owned  subsidiaries  of the Company.  (Incorporated  by
                  reference from Exhibit 10.32  to Registrant's Form 10-K dated
                  March 31, 1999).

         10.14    Promissory Note for $3.5 million dated as of November 5, 1998,
                  by and among  AmSouth Bank and the Company.  (Incorporated  by
                  reference from Exhibit 10.33  to Registrant's Form 10-K dated
                  March 31, 1999).

         10.15    Advised  Revolving  Line  of  Credit  Agreement  dated  as  of
                  November  5, 1998,  by and  between  AmSouth  Bank and certain
                  wholly-owned  subsidiaries  of the Company.  (Incorporated  by
                  reference from Exhibit 10.34  to Registrant's Form 10-K dated
                  March 31, 1999).

         10.16    Revolving  Credit Note dated as of  November  5, 1998,  by and
                  among AmSouth Bank and certain  wholly-owned  subsidiaries  of
                  the Company.  (Incorporated  by reference from Exhibit 10.35
                  to Registrant's Form 10-K dated March 31, 1999).

         10.17    Unconditional  Guarantee dated as of November 5, 1998, between
                  AmSouth Bank and the Company.  (Incorporated by reference from
                  Exhibit  10.36  to  Registrant's  Form 10-K  dated  March 31,
                  1999).

         10.18    Security  Agreement  dated  November  5,  1998,  by and  among
                  AmSouth  Bank and  certain  wholly-owned  subsidiaries  of the
                  Company.  (Incorporated  by reference  from Exhibit 10.37  to
                  Registrant's Form 10-K dated March 31, 1999).

         10.19    1998 Stock Incentive Plan of Transit Group, Inc. (incorporated
                  by reference  from Exhibit 99.1 to  Registrant's  December 11,
                  1998 S-8, Registration No. 333-68807)

         10.20    1998  Employee  Stock  Purchase  Plan of Transit  Group,  Inc.
                  (incorporated  by reference from Exhibit 99.2 to  Registrant's
                  December 11, 1998 S-8, Registration No. 333-68807)

         10.21    Agreement  and Plan of Merger  dated  December 23, 1998 by and
                  among  certain  wholly-owned   subsidiaries  of  the  Company.
                  (Incorporated   by   reference   from   Exhibit   10.40   to
                  Registrant's Form 10-K dated March 31, 1999).

         10.22    Agreement  and Plan of Merger  dated  December 23, 1998 by and
                  among  certain  wholly-owned   subsidiaries  of  the  Company.
                  (Incorporated   by   reference   from   Exhibit   10.41   to
                  Registrant's Form 10-K dated March 31, 1999).

         10.23    Lease  Agreement  governing  the  Company's  terminal in Olive
                  Branch, Mississippi dated January 19, 1999 between the Company
                  and Horvath & Horvath,  LLC.  (Incorporated  by reference from
                  Exhibit  10.42  to  Registrant's  Form 10-K  dated  March 31,
                  1999).

         10.24    Lease   Agreement   governing   the   Company's   terminal  in
                  Chesterton,  Indiana  dated March 18, 1999 between the Company
                  and Ameling Properties,  LLC.  (Incorporated by reference from
                  Exhibit  10.43 to  Registrant's  Form 10-K  dated  March 31,
                  1999).

         10.25    Agreement and Plan of  Reorganization  made as of July 2, 1999
                  by and between Transit Group, Inc., a Florida corporation, R&M
                  Enterprises, Inc., a Nebraska corporation,  Michael P. Sortino
                  and Randy A. Williams  (Incorporated by reference from Exhibit
                  2.1 to the Form 8-K dated July 30, 1999)

         10.26    Stock  Purchase  Agreement  made as of July  2,  1999,  by and
                  between Transit Group, Inc., a Florida corporation, Michael P.
                  Sortino and Randy A. Williams  (Incorporated by reference from
                  Exhibit 2.2 to the Form 8-K dated October 13, 1999)

         10.27    Agreement and Plan of Reorganization made as of July 30, 1999,
                  by and between Transit Group, Inc., a Florida corporation, MDR
                  Cartage, Inc., an Arkansas corporation,  C. Frank Mitchell and
                  Bobby W. Riley  (Incorporated by reference from Exhibit 2.1 to
                  the Form 8-K dated October 13, 1999)

         10.28    Agreement and Plan of Reorganization made as of July 30, 1999,
                  by and between  Transit  Group,  Inc., a Florida  corporation,
                  Bestway Trucking,  Inc., a Kentucky corporation,  and David L.
                  Summitt  (Incorporated  by  reference  from Exhibit 2.2 to the
                  Form 8-K dated August 13, 1999)

         10.29    Membership  Interest Purchase Agreement made as July 30, 1999,
                  by and between  Transit  Group,  Inc., a Florida  corporation,
                  David L. Summitt and Jenny Summitt  (Incorporated by reference
                  from Exhibit 2.3 to the Form 8-K dated August 13, 1999)

         10.30    Stock  Purchase  Agreement  made as of July 30,  1999,  by and
                  between Transit Group, Inc., a Florida corporation,  and David
                  L. Summitt  (Incorporated by reference from Exhibit 2.4 to the
                  Form 8-K dated August 13, 1999)

         10.31    Acquisition  Credit  Agreement  dated as of October  25,  1999
                  among the Registrant,  the Lenders named therein and Bank One,
                  N.A.  (Incorporated  by reference from Exhibit 2.1 to the Form
                  8-K dated November 8, 1999)

         10.32    Credit  Agreement  dated as of  October  25,  1999,  among the
                  Registrant,  the  Lenders  named  therein  and Bank One,  N.A.
                  (Incorporated  by  reference  from Exhibit 2.2 to the Form 8-K
                  dated November 8, 1999)

         10.33    Pledge and  Security  Agreement  dated as of October 25, 1999,
                  among  the  Registrant,  the  subsidiaries  of the  Registrant
                  listed therein and Bank One, N.A.  (Incorporated  by reference
                  from Exhibit 2.3 to the Form 8-K dated November 8, 1999)

         10.34    Subsidiary  Guaranty  dated as of October 25, 1999 made by the
                  Registrant  listed  therein  for the  benefit  of the  Lenders
                  (Incorporated  by  reference  from Exhibit 2.4 to the Form 8-K
                  dated November 8, 1999)

         10.35    Purchase  Agreement  dated May 13, 1999 by and between Transit
                  Group,   Inc.,  and  GE  Capital  Equity   Investments,   Inc.
                  (Incorporated  by reference  from Exhibit 10.1 to the Form 8-K
                  dated   June   10,   1999)   10.36   Stockholders'   Agreement
                  (Incorporated  by reference  from Exhibit 10.3 to the Form 8-K
                  dated  June 10,  1999)  10.37  Registration  Rights  Agreement
                  (Incorporated  by reference  from Exhibit 10.4 to the Form 8-K
                  dated June 10, 1999)

11.1     Statement re: Computation of Per Share Earnings            Pages 56-61
21.      Subsidiaries of the Registrant                             Page 61
23.1     Consent of PricewaterhouseCoopers LLP                      Page 62
27.      Financial Data Schedule                         (for SEC purposes only)

         We filed the following reports on Form 8-K during the fourth quarter of
1999:

         (1)      On October  4,  1999,  we filed a report on Form 8-K/A to file
                  financial  statements for R&M  Enterprises,  Inc. and Williams
                  Truck Brokers,  Inc., two companies that we acquired,  and pro
                  forma financial statements to reflect the combination of these
                  companies with us.

         (2)      On October 15,  1999,  we filed a report on Form 8-K/A to file
                  financial   statements   for   MDR   Cartage,   Inc.   and  BF
                  Transportation,  Inc., two companies that we acquired, and pro
                  forma financial statements to reflect the combination of these
                  companies with us.

         (3)      On October 15,  1999,  we filed an  additional  report on Form
                  8-K/A to file financial statements for Bestway Trucking, Inc.,
                  who we acquired, and pro forma financial statements to reflect
                  the combination of Bestway with us.

         (4)      On November  8, 1999,  we filed a report on Form 8-K to report
                  that we had  entered  into a five year,  $150  million  credit
                  facility with Banc One, N.A. as agent.



<PAGE>


SIGNATURES

Pursuant to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Act of 1934,  the  Registrant  has duly  caused  this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

         TRANSIT GROUP, INC.


         BY:      /s/ Philip A. Belyew
                  ----------------------------------------
                  Philip A. Belyew,  President,  Chief  Executive  Officer,  and
                  Director

                  Date: March 30, 2000

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been  signed by the  following  persons on behalf of the  Registrant  in the
capabilities and on the date indicated.
<TABLE>

               Signature                                Title                             Date
<CAPTION>

<S>                                      <C>                                        <C>
      /s/ T. Wayne Davis                 Chairman of the Board                       March 30, 2000
    ---------------------------------    of Directors
    T. Wayne Davis

      /s/ Philip A. Belyew               Director, President, and                    March 30, 2000
    ---------------------------------    Chief Executive Officer
    Philip A. Belyew                     (principal executive  officer)


      /s/ Carroll L. Fulmer              Director                                    March 30, 2000
    ---------------------------------
    Carroll L. Fulmer

      /s/ Derek E. Dewan                 Director                                    March 30, 2000
    ---------------------------------
    Derek E. Dewan

      /s/ Robert R. Hermann              Director                                    March 30, 2000
    ---------------------------------
    Robert R. Hermann

      /s/ Ford G. Pearson                Director                                    March 30, 2000
    ---------------------------------
    Ford G. Pearson

      /s/ Wayne N. Nellums               Executive Vice President                    March 30, 200
    ---------------------------------    and Chief Financial Officer
    Wayne N. Nellums                     (principal financial officer)


     /s/ Scott J. Tsanos                 Vice President                              March 30, 2000
    ---------------------------------    (principal accounting officer)
    Scott J. Tsanos
</TABLE>
<PAGE>





                               TRANSIT GROUP, INC.

                     1999 CONSOLIDATED FINANCIAL STATEMENTS

                                    CONTENTS


                                                                        Pages
  Report of Independent Accountants                                      33

  Consolidated Financial Statements

     Consolidated Balance Sheets as of December 31, 1999 and 1998        34

     Consolidated Statements of Operations for the years ended           35
        December 31, 1999, 1998 and 1997

     Consolidated Statements of Changes in Total Non Redeemable
       Preferred Stock, Common Stock and Other Stockholders' Equity      36
       for the years ended December 31, 1999, 1998 and 1997

     Consolidated  Statements  of Cash Flows for the years ended         37
       December 31, 1999, 1998 and 1997

    Notes to Consolidated Financial Statements                          38-55























<PAGE>




                           REPORT OF INDEPENDENT  ACCOUNTANTS


To the Board of Directors and Stockholders
of Transit Group, Inc.

In our opinion, the consolidated financial statements listed in the accompanying
index  present  fairly,  in all material  respects,  the  financial  position of
Transit Group,  Inc. and its subsidiaries at December 31, 1999 and 1998, and the
results of their  operations and their cash flows for each of the three years in
the period ended  December 31, 1999 in  conformity  with  accounting  principles
generally  accepted in the United  States.  These  financial  statements are the
responsibility of the Company's management;  our responsibility is to express an
opinion on these  financial  statements  based on our audits.  We conducted  our
audits of these  statements in  accordance  with  auditing  standards  generally
accepted in the United States,  which require that we plan and perform the audit
to obtain reasonable  assurance about whether the financial  statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and  disclosures in the financial  statements,  assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall  financial  statement  presentation.  We believe that our
audits provide a reasonable basis for the opinion expressed above.

/s/ PricewaterhouseCoopers LLP
Atlanta, Georgia
March 30, 2000

























<PAGE>

<TABLE>
<CAPTION>

                                           TRANSIT GROUP, INC.
                                       CONSOLIDATED BALANCE SHEETS
                                    (In thousands, except share data)

     ASSETS
                                                                             December 31,
                                                                   -----------------------------------
                                                                       1999                 1998
                                                                   --------------       --------------
Current assets:
<S>                                                                      <C>                  <C>
  Cash                                                             $       2,156        $       2,020
  Accounts receivable (net of allowance of $3,441 and $706)               71,543               28,437
  Other current assets                                                    10,259                5,611
  Refundable income taxes                                                  4,210                -----
  Deferred  income taxes                                                   9,655                1,103
                                                                   --------------       --------------
      Total current assets                                                97,823               37,171
                                                                   --------------       --------------

Noncurrent assets:
  Property, equipment, and capitalized leases                            114,718               42,818
  Goodwill                                                               112,197               50,062
  Other assets                                                             1,676                  476
                                                                   --------------       --------------
      Total noncurrent assets                                            228,591               93,356
                                                                   --------------       --------------

      Total assets                                                 $     326,414        $     130,527
                                                                   ==============       ==============

       LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Current obligations under capital leases                               $ 1,586              $ 1,518
  Current maturities of long-term debt                                    22,404               10,754
  Accounts payable                                                        11,014                6,170
  Bank overdrafts                                                          2,856                1,319
  Accrued expenses and other current liabilities                          16,679               10,029
  Net current liabilities of discontinued operations                          29                  273
                                                                   --------------       --------------
      Total current liabilities                                           54,568               30,063
                                                                   --------------       --------------

Noncurrent liabilities:
  Long-term obligations under capital leases                               1,952                2,429
  Long-term debt                                                         137,578               36,534
  Note payable to affiliate of Chairman                                    -----                3,500
  Other liabilities                                                          267                4,291
  Deferred income taxes                                                   25,482                  439
                                                                   --------------       --------------
     Total noncurrent liabilities                                        165,279               47,193
                                                                   --------------       --------------

     Total liabilities                                                   219,847               77,256
                                                                   --------------       --------------

Commitments and contingencies (Note 15)

Redeemable common stock                                                    3,675                5,115
                                                                   --------------       --------------

Redeemable preferred  stock                                               24,795                -----
                                                                   --------------       --------------

Non redeemable preferred stock, common stock and other
 stockholders' equity:
  Preferred stock, no par value, 20,000,000 and 5,000,000
   shares authorized, none outstanding                                     -----                -----
  Note receivable secured by stock                                         -----                 (729)
  Common Stock, $.01 par value, 100,000,000 and 30,000,000 shares
   authorized, 31,823,751 and 23,610,190 shares issued and
    outstanding                                                              308                  222
  Additional paid-in capital                                              94,577               68,411
  Accumulated deficit                                                    (16,788)             (19,748)
                                                                   --------------       --------------
      Total non redeemable preferred stock, common stock
       and other stockholders' equity                                     78,097               48,156
                                                                   --------------       --------------

      Total liabilities and stockholders' equity                   $     326,414        $     130,527
                                                                   ==============       ==============
</TABLE>
   See accompanying notes to consolidated financial statements.
       34
<PAGE>

<TABLE>
<CAPTION>

                                                TRANSIT GROUP, INC.
                                        CONSOLIDATED STATEMENTS OF OPERATIONS
                                          (In thousands, except share data)

                                                               Years ended December 31,
                                                   --------------------------------------------------
                                                       1999              1998               1997
                                                   -------------      ------------      -------------
<S>                                                   <C>               <C>                 <C>
Total operating revenues                           $    355,526       $   177,553       $     34,011
                                                   -------------      ------------      -------------

Operating expenses:
  Purchased transportation                              131,296            77,372             15,683
  Salaries, wages and benefits                           91,574            40,670              7,460
  Fuel                                                   31,862            12,932              2,598
  Operating supplies and expenses                        39,187            16,353              3,060
  Lease expense-revenue equipment                        20,436             6,057                216
  Insurance                                               4,802             2,845                846
  Depreciation and amortization expense                  13,856             7,518              1,610
  General and administrative expense                      9,549             4,914              1,160
                                                   -------------      ------------      -------------
      Total operating expenses                          342,562           168,661             32,633
                                                   -------------      ------------      -------------

      Operating income                                   12,964             8,892              1,378
  Interest expense                                        6,853             4,310              1,045
                                                   -------------      ------------      -------------

Continuing operations:
  Earnings from continuing operations
   before income taxes                                    6,111             4,582                333
  Income taxes (benefit) attributable to
             continuing operations                        1,731            (7,114)                71
                                                   -------------      ------------      -------------
      Income from continuing operations                   4,380            11,696                262

Discontinued operations:
  Loss from discontinued operations                       -----             -----             (6,114)
  Loss on disposal including provision
   for operating losses through disposal date             -----             -----             (5,792)
                                                   -------------      ------------      -------------
      Net income (loss)                                   4,380            11,696            (11,644)

Preferred stock dividend requirement                     (1,420)            -----               (385)
                                                   -------------      ------------      -------------

         Income (loss) to available common
             shareholders                          $      2,960       $    11,696       $    (12,029)
                                                   =============      ============      =============

Income (loss) per basic common share:
  Continuing operations                            $      $ 0.11      $       0.52      $       (0.01)
  Discontinued operations:
    Loss from discontinued operations                     -----             -----              (0.55)
    Loss on disposal                                      -----             -----              (0.52)
                                                   -------------      ------------      -------------
      Net income (loss) per basic common share     $       0.11       $      0.52       $      (1.08)
                                                   =============      ============      =============

Weighted average number of basic
  common shares outstanding                          28,048,889        22,391,142         11,094,207
                                                   =============      ============      =============

Income (loss) per diluted common share:
  Continuing operations                            $       0.10       $      0.49       $      (0.01)
  Discontinued operations:
    Loss from discontinued operations                     -----             -----              (0.55)
    Loss on disposal                                      -----             -----              (0.52)
                                                   -------------      ------------      -------------
      Net income (loss) per diluted common share   $       0.10       $      0.49       $      (1.08)
                                                   =============      ============      =============

Weighted average number of diluted
  common shares outstanding                          28,904,089        23,646,073         11,094,207
                                                   =============      ============      =============
</TABLE>

    See accompanying notes to consolidated financial statements.
    35
<PAGE>


<TABLE>
<CAPTION>

                        TRANSIT GROUP, INC.

                CONSOLIDATED STATEMENTS OF CHANGES IN TOTAL
                NON REDEEMABLE PREFERRED STOCK, COMMON STOCK
                     AND OTHER STOCKHOLDERS' EQUITY
                         (Dollars in thousands)
                                                                                                   Total
                               Preferred  Common   Note receivable   Additional   Accumulated   stockholders'
                                stock     stock    secured by stock paid-in capital deficit        equity

<S>                                <C>      <C>         <C>         <C>          <C>             <C>
Balance December 31, 1996       $     4   $    38   $     -----   $    21,386   $   (19,415)  $     2,013
Dividends on preferred stock      -----     -----         -----         -----          (385)         (385)
Conversion of preferred stock        (4)       43         -----           346         -----           385
Sale of common stock              -----         7         -----         1,212         -----         1,219
Stock issued in satisfaction
 of debt                          -----        27         -----         4,682         -----         4,709
Stock issued for acquisitions     -----        82         -----        26,371         -----        26,453
Stock issued in connection with
 sale of GPS                      -----         9         -----         4,024         -----         4,033
Stock subject to redemption       -----       (20)        -----        (7,432)        -----        (7,452)
Note secured by stock             -----     -----          (675)        -----         -----          (675)
Exercise of common stock options  -----     -----         -----            62         -----            62
Net Loss                          -----     -----         -----         -----       (11,644)      (11,644)
                                --------- --------- ------------- ------------- ------------- -------------

Balance December 31, 1997         -----       186          (675)       50,651       (31,444)       18,718
Stock retired                     -----     -----         -----          (109)        -----          (109)
Exercise of stock options         -----     -----         -----           155         -----           155
Accrued interest                  -----     -----           (54)        -----         -----           (54)
Stock issued for acquisitions     -----        30         -----        15,383         -----        15,413
Stock subject to redemption       -----         6         -----         2,331         -----         2,337
Net income                        -----     -----         -----         -----        11,696        11,696
                                --------- --------- ------------- ------------- ------------- -------------

Balance December 31, 1998         -----       222          (729)       68,411       (19,748)       48,156
Exercise of stock options         -----     -----         -----           271         -----           271
Accrued interest                  -----     -----           (41)        -----         -----           (41)
Preferred stock dividends         -----     -----         -----         -----        (1,420)       (1,420)
Redemption of non recourse note   -----        (1)          770          (769)        -----         -----
Stock returned to settle
 contingencies and retired        -----        (4)        -----        (1,544)        -----        (1,548)
Stock issued to affiliate of
 Chairman                         -----         1         -----           230         -----           231
Stock issued for acquisitions     -----        86         -----        26,542         -----        26,628
Stock subject to redemption       -----         4         -----         1,436         -----         1,440
Net income                        -----     -----         -----         -----         4,380         4,380
                               ---------- -------- ------------- ------------- ------------- -------------

Balance December 31, 1999      $  -----   $    308 $      -----  $     94,577   $   (16,788) $     78,097
                               ========== ======== ============= ============= ============= =============
</TABLE>


















  See accompanying notes to consolidated financial statements.
                                                   36
<PAGE>


<TABLE>
<CAPTION>

                             TRANSIT GROUP, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)


                                                              Years ended December 31,
                                               -----------------------------------------------------------
                                                   1998                   1998                  1997
                                               -------------          -------------         --------------
<S>                                                <C>                  <C>                      <C>
Cash flows from operating activities:
  Income from continuing operations            $      4,380           $     11,696          $         262
                                               -------------          -------------         --------------

  Adjustments to reconcile  net income to cash
  (used) provided by continuing operations:
     Depreciation and amortization                   13,856                  7,518                  1,610
     Deferred income taxes                            1,138                 (7,666)                     -
     Gain on disposal of fixed assets                  (544)                     -                      -
     Bad debt expense                                   390                      -                      -
     Changes in assets and liabilities:
       (Increase) decrease in accounts receivable   (17,009)                (2,797)                 2,062
       (Increase) decrease in other assets           (4,184)                   162                    258
       (Decrease) increase in accounts payable       (1,328)                (2,498)                   283
       (Decrease) increase in accrued expenses       (3,762)                 2,027                    (42)
       (Decrease) increase in other long-term
        liabilities                                    (215)                    22                    208
       Other                                           (505)                   355                     84
                                               -------------          -------------         --------------
         Total adjustments                          (12,163)                (2,877)                 4,463
                                               -------------          -------------         --------------

       Net cash (used) provided by
        continuing operations                        (7,783)                 8,819                  4,725
       Net cash used by discontinued operations        (244)                  (413)                (4,584)
                                               -------------          -------------         --------------
         Net cash (used) provided by
          operating activities                       (8,027)                 8,406                    141
                                               -------------          -------------         --------------

Cash flows from investing activities:
  Business combinations, net of cash acquired       (28,413)                (3,812)                (3,883)
  Proceeds from disposal of equipment                24,803                 15,044                    314
  Purchase of equipment                             (21,553)                (7,067)                  (146)
  Other                                                 608                     82                    619
                                               -------------          -------------         --------------
         Net cash (used) provided by
          investing activities                      (24,555)                 4,247                 (3,096)
                                               -------------          -------------         --------------

Cash flows from financing activities:
  Proceeds from issuance of redeemable
             preferred stock                         24,795                      -                      -
  Proceeds from issuance of stock                         -                      -                  1,282
  Exercise of common stock options                      271
  Retirement of common stock                         (1,548)                     -                      -
  Dividends paid on preferred stock                  (1,420)                     -                   (282)
  Increase in short-term borrowings                       -                    606                  1,938
  Increase in long-term debt and
   capital lease obligations                        128,882                 17,799                  7,615
  Repayment of long-term debt and
   capital lease obligations                       (118,025)               (30,485)                (5,194)
  (Decrease) increase in bank overdraft                (236)                   657                 (1,621)
                                               -------------          -------------         --------------
         Net cash prov (used) by
          financing activities                       32,719                (11,423)                 3,738
                                               -------------          -------------         --------------

Increase in cash                                        137                  1,230                    783
Cash beginning of period                              2,020                    790                      7
                                               -------------          -------------         --------------
Cash end of period                             $      2,157           $      2,020          $         790
                                               =============          =============         ==============

Supplemental cash flow data:
  Cash paid for interest                       $      6,252           $      3,917          $         841
                                               =============          =============         ==============

Business combinations:
  Fair value of assets acquired                $    177,846           $     57,055          $      80,703
  Fair value of liabilities assumed                (122,766)               (37,141)               (50,100)
  Common stock issued                               (26,628)               (15,413)               (26,453)
                                               -------------          -------------         --------------
    Net cash payments                          $     28,452           $      4,501          $       4,150
                                               =============          =============         ==============
</TABLE>
See accompanying notes to consolidated financial statements.
         37






TRANSIT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share data)

NOTE 1: Organization and Basis of Presentation

Transit Group, Inc. ("Transit Group" or the "Company") is a Florida  corporation
engaged,  through  subsidiaries,  in the  short  and  long  haul  transportation
services  business.  The Company formerly known as General Parcel Service,  Inc.
("GPS") changed its name effective June 30, 1997.

In conjunction  with the name change,  the Company approved a plan to dispose of
all operations  previously  performed by GPS. The Company has accounted for this
disposal as a discontinued  operation (See Note 4 to the Consolidated  Financial
Statements).

NOTE 2: Summary of Significant Accounting Policies

Principles of Consolidation - The accompanying consolidated financial statements
include accounts of the Company and its wholly-owned subsidiaries.  All material
inter-company accounts and balances have been eliminated.

Reclassifications  - Certain  prior  year  balances  have been  reclassified  to
conform to the current year financial statement presentation.

Estimates - The process of preparing  financial  statements  requires the use of
estimates  and  assumptions  regarding  certain  types of  assets,  liabilities,
revenues,   and  expenses.   Such  estimates   primarily   relate  to  unsettled
transactions and events as of the date of the financial statements. Accordingly,
upon settlement, actual results may differ from estimated amounts.

Revenue Recognition - Revenues and related expenses are recognized in accordance
 with EITF 91-9  "Revenue  and  Expense  Recognition  for  Freight  Services  in
 Process".

Cash - The  Company  considers  all highly  liquid  investments  purchased  with
original  maturities  of  three  months  or  less to be  cash  equivalents.  The
Company's cash management program utilizes zero balance accounts.

Concentrations of Credit Risk - Financial  instruments which potentially subject
the Company to concentrations of credit risk consist primarily of trade accounts
receivable.  No  single  customer  accounted  for a  significant  amount  of the
Company's sales, and there were no significant accounts receivable from a single
customer.  The Company  reviews a customer's  credit  history  before  extending
credit and generally  does not require  collateral.  The Company  establishes an
allowance for doubtful  accounts based upon factors  surrounding the credit risk
of specific customers,  historical trends, and other information.  The Company's
historical  experience  in collection  of accounts  receivable  falls within the
recorded  allowances.  Due to these  factors,  no additional  credit risk beyond
amounts  provided for  collection  losses is believed  inherent in the Company's
trade accounts receivable.

Equipment -  Equipment  is stated at  historical  cost,  (except  for  equipment
obtained in connection with the Company's business  acquisitions which is stated
at fair market value on the date of acquisition) net of accumulated depreciation
and  amortization.  Except  for life  extending  repair  costs  (such as  engine
overhauls),  all equipment maintenance and repair costs are charged to operating
expense as incurred. The Company periodically reviews the value of its equipment
to determine if an impairment has occurred.  The Company  measures the potential
impairment  of its  equipment  by the  undiscounted  value  of  expected  future
operating  cash flows in relation to the fair value of the  equipment.  Based on
its review the  Company  does not believe an  impairment  of its  equipment  has
occurred.  Depreciation  is  provided  using the  straight-line  method over the
estimated  useful life of the asset.  Leased equipment is amortized over varying
periods  not in excess of the  estimated  useful life of the asset or lease term
depending on the type of capital lease. Gain or loss upon retirement or disposal
of equipment is recorded as income or expense.  The ranges of depreciable  lives
used for financial reporting purposes are:

                                                                        Years
         Autos, trucks, trailers and life extending repairs            2 to 10
         Office equipment and furniture                                3 to 10
         Terminal equipment                                            3 to 10
         Buildings and improvements                                   10 to 20

Goodwill  -  Goodwill,  representing  the  excess of cost over fair value of net
assets acquired in business  combinations  accounted for by the purchase method,
is amortized by the straight-line method over 40 years. The Company periodically
reviews the value of its goodwill to determine if an  impairment  has  occurred.
The Company  measures  the  potential  impairment  of  recorded  goodwill by the
undiscounted  value of expected  future  operating cash flows in relation to its
net  capital  investment  in  the  acquired  business.  If  an  impairment  were
determined to exist,  goodwill would be written down to fair market value. Based
on its review,  the Company does not believe that an  impairment of its goodwill
has  occurred.  Amortization  expense was $1.8 million,  $1.0  million,  and $.3
million, in 1999, 1998 and 1997, respectively. Accumulated amortization was $3.0
million and $1.2 million at December 31, 1999 and 1998, respectively.

Income Taxes - Deferred  tax  liability  or assets are  determined  based on the
difference  between  the  financial  statement  and  tax  bases  of  assets  and
liabilities  as  measured  by the enacted tax rates which will be in effect when
these differences reverse.

Foreign  Currency  Translation  - Balance sheet  accounts are  translated at the
exchange rate in effect at each year-end and income  accounts are  translated at
the  average  rates of  exchange  prevailing  during the year.  Gains and losses
resulting from foreign currency transactions are currently included in income.

Comprehensive Income - The Company has no items of other comprehensive income at
December 31, 1999, 1998 and 1997.

Business  Segments  -  Management  views the  Company as  operating  in a single
segment.

Earnings Per Share ("EPS") - Basic EPS is calculated  using the weighted average
number of  outstanding  common  shares for the  period,  which were  28,048,889,
22,391,142  and  11,094,207  in 1999,  1998 and 1997  respectively.  Diluted EPS
reflects the potential dilution that could occur if securities were exercised or
converted  into common  stock or resulted in the  issuance of common  stock that
would then share in earnings.  Shares used in the diluted EPS  calculation  were
28,904,089 and 23,646,073 in 1999 and 1998 respectively.  The difference between
basic and diluted shares  represents  the number of common shares  issuable upon
exercise  of  diluted  options.  In  1997,  options  were  not  included  in the
computation  of fully  dilutive  earnings per share  because to do so would have
been anti-dilutive.

NOTE 3: Business Combinations

The business  combinations  describe below were accounted for under the purchase
method  of  accounting.  Accordingly,  the  operating  results  of the  acquired
companies have been included in the Company's  consolidated financial statements
since their  respective  dates of  acquisition.  Assets acquired and liabilities
assumed were recorded at fair market value at the date of acquisition.

In July 1997,  the Company  acquired  Carolina  Pacific,  Inc., a privately held
North Carolina corporation,  and the business and related assets operated by the
owners of Carolina  Pacific.  Carolina  Pacific is a truckload  carrier based in
High Point, North Carolina. Pursuant to the Stock Purchase Agreement executed at
closing,  the Company purchased all of the outstanding capital stock of Carolina
Pacific  and  the  business  and  related  assets  operated  and  owned  by  the
shareholders  of Carolina  Pacific  for $3.7  million in cash,  the  issuance of
1,733,000  shares of common stock of the Company to the shareholders of Carolina
Pacific, and the assumption of approximately $0.6 million in debt.

In  August  1997,  the  Company  acquired  Service  Express,  Inc.,  an  Alabama
corporation  with  operations  based in  Tuscaloosa,  Alabama.  Pursuant  to the
Agreement and Plan of Reorganization executed at closing, a wholly-owned Alabama
subsidiary  of  Transit  Group was  merged  with and into  Service  Express in a
reverse  triangular  merger,  with Service  Express  remaining as the  surviving
corporation  of  the  merger.  Upon  consummation  of  the  merger,  all  of the
outstanding common stock of Service Express was converted into 903,226 shares of
Transit  Group common  stock.  In  connection  with the  acquisition  of Service
Express,  the Company granted the selling  shareholders the right through August
15, 1998 (extended to February 1999) to require the Company to redeem up to $1.8
million of shares of the Company at $3.875 per share. Through December 31, 1998,
selling  shareholders  had sold $.4  million of stock to third  parties and $1.4
million was redeemed by the Company in the first quarter of 1999.

Also in August 1997, the Company  acquired Capitol  Warehouse,  Inc., a Kentucky
corporation  with  operations  based in  Louisville,  Kentucky.  Pursuant to the
Agreement  and  Plan of  Reorganization  executed  at  closing,  a  wholly-owned
Kentucky  subsidiary of Transit Group was merged with and into Capitol Warehouse
in a  reverse  triangular  merger,  with  Capitol  Warehouse  remaining  as  the
surviving corporation of the merger. Upon consummation of the merger, all of the
outstanding  common stock of Capitol Warehouse was converted into 641,283 shares
of Transit Group common stock.  In connection  with the  acquisition  of Capitol
Warehouse,  the Company granted the selling shareholder the right to require the
Company to redeem up to $.3 million of the  Company's  stock at $6.75 per share.
The shareholders  have exercised their redemption rights for all of these shares
which were purchased by third parties.

In August 1997, the Company consummated the acquisition of Carroll Fulmer Group,
Inc.,  a  Florida  corporation  with  operations  based in  Groveland,  Florida.
Pursuant  to the  Agreement  and Plan of  Reorganization  executed  at  closing,
Carroll  Fulmer  merged with and into Transit  Group Sub.,  Inc. a  wholly-owned
Florida subsidiary of Transit Group (the "Subsidiary"),  in a forward triangular
merger,  with the  Subsidiary  remaining  as the  surviving  corporation  of the
merger.  Upon consummation of the merger, the Company executed a promissory note
in the amount of $2.25 million payable over 5 years,  and all of the outstanding
common stock of Carroll Fulmer was converted  into  4,166,666  shares of Transit
Group common  stock,  and the  Subsidiary's  name was changed to Carroll  Fulmer
Group,  Inc. In connection with the  acquisition of Carroll Fulmer,  the Company
granted the selling  shareholders the right to require either the Company redeem
or a major  shareholder of the Company  acquire up to $6.0 million of stock at a
price of $3.60 per share. Of this $6.0 million,  redemption rights in the amount
of $2.5 million were exercisable  before August 29, 1998 when an additional $3.5
million  became  exercisable.  All  redemption  rights  expire  August 29, 2003.
Through  December  31,  1999,  the  Company  has  received   notification   that
shareholders   have   exercised   their   redemption   rights  with  respect  to
approximately $2.3 million. Of this amount, approximately $2.25 million of stock
has been  purchased by third  parties and $.08 million has been  redeemed by the
Company,  thereby reducing the Company's obligation.  The remaining $3.7 million
will be either sold to third  parties,  redeemed by the Company or acquired by a
major shareholder. In the second quarter of 1999, the Company loaned $.5 million
to one of the selling  shareholders in the form of an 8% secured promissory note
due on demand.

In  December  1997,  the  Company  acquired  the net assets of Rainbow  Trucking
Services,  Inc.,  a Kentucky  corporation  engaged  in the full load,  long-haul
trucking business. Upon consummation of this acquisition all of the common stock
of Rainbow  Trucking (and two affiliate  companies)  was converted  into 679,246
shares of Transit  Group  common  stock.  The Company  made loans to the selling
shareholders  in the amount of $675,000.  Such loans became due on June 30, 1999
at which time the notes were  redeemed in exchange for 101,887 of the  Company's
common shares.

In January 1998,  the Company  acquired  Transportation  Resources & Management,
Inc.  ("TRM"),  an Indiana  corporation  with  operations  based in Fort  Wayne,
Indiana.  Pursuant to the  Reorganization  Agreement  executed  at closing,  the
Company purchased all the outstanding  capital stock of TRM and the business and
related assets operated and owned by the  shareholders of TRM for $.2 million in
the form of a secured promissory note and 365,957 shares of the Company's common
stock.  The  promissory  note  was  increased  by $.2  million  and the due date
extended to May 2000 from its  original  due date of April 1999.  In  accordance
with the terms of the Purchase Agreement if the Company's common stock price did
not  exceed  a  specified   target  price  on  February  1,  1999,  the  selling
shareholders were entitled to additional  shares. In the second quarter of 1999,
20,823 additional common shares were issued.

In May 1998, the Company  acquired  Certified  Transport and Venture  Logistics,
Inc.,  Indiana  corporations  with  headquarters  in  Indianapolis.  The Company
purchased all of the outstanding  capital stock of Certified and Venture for $.8
million in cash, a $.4 million secured  promissory note and 1,072,165  shares of
the Company's  common stock. The original due date of the loan was extended from
November 1999 to May 2000.

In June 1998, the Company  consummated  the  acquisition  of KJ  Transportation,
Inc., a New York  corporation  with  operations  based in Farmington,  New York.
Pursuant to the Agreement  and Plan of  Reorganization  executed at closing,  KJ
merged with and into  Transit  Group  Subsidiary,  Inc. in a forward  triangular
merger with the Subsidiary remaining as the surviving corporation of the merger.
Upon consummation of the merger all of the outstanding stock of KJ was converted
into 878,688  shares of the Company's  stock and a cash payment in the amount of
$3.0 million.  Simultaneously with the acquisition of KJ, we acquired all of the
outstanding stock of J&L Leasing, Inc. of Farmington, New York for $.5 million.

In July 1998, the Company  purchased all of the issued and outstanding  stock of
two Canadian numbered companies which together own 100% of the outstanding stock
of Network Transport, Ltd. a Toronto, Canada based trucking company. The Company
made a cash payment of $.25 million and issued  191,491  shares of the Company's
common stock in exchange for all of the issued and outstanding shares of the two
numbered companies.

In August 1998,  the Company issued 178,519 common shares in exchange for all of
the  issued and  outstanding  shares of  Diversified  Trucking  Corporation,  an
Opelika, Alabama based trucking company.

Also in August  1998,  the Company  acquired  all of the issued and  outstanding
shares of Dothan, Alabama - based Northstar Transportation, Inc. in exchange for
349,091 shares of Transit Group common stock.

In January 1999, the Company acquired Olive Branch, Mississippi - based Priority
Transportation,  Inc. in exchange for a cash payment of $1.5 million and 890,000
shares of the Company's common stock.

In March 1999, the Company made two  acquisitions.  First,  the Company acquired
Massengill  Trucking Services,  Inc. in a forward  triangular  merger.  Based in
Hickory Flat, Mississippi,  the Company issued 1,069,518 shares of the Company's
common stock and paid $2.2 million in cash for all of the issued and outstanding
shares of  Massengill.  Next the Company  acquired KAT, Inc.,  headquartered  in
Chesterton,  Indiana  for a cash  payment of $.75  million  and the  issuance of
811,500 shares of the Company's common stock.

In July  1999,  the  Company  acquired  three more  companies.  Based in Gretna,
Nebraska,  the Company  acquired R&M  Transportation,  Inc.,  and its  affiliate
Williams  Brothers  Trucking  for  cash of $1.4  million  and  the  issuance  of
1,215,000 shares of the Company's common stock. Headquartered in Jeffersonville,
Indiana,  Bestway Trucking,  Inc. and its affiliates DLS and Connection One were
acquired for 1,542,501  shares of the Company's  common stock and a cash payment
of $6.8 million.  The Company's third July  acquisition  was MDR Cartage,  Inc.,
headquartered  in  Jonesboro,  Arkansas.  In exchange  for all of the issued and
outstanding  shares of MDR, the Company  issued  2,450,000  shares of its common
stock and paid $1.8 million in cash.

In September 1999, the Company acquired Green Bay,  Wisconsin based Fox Midwest,
Inc. and its affiliate SDS Distributors in exchange for a cash payment of $1.875
million and the issuance of 510,204 shares of its common stock.

In November 1999,  the Company  completed the  acquisition  of Atlanta,  Georgia
based - Land  Transportation,  LLC.  The Company  issued  100,000  shares of its
common stock and paid $18 million (including a $6 million note) for the accounts
receivables  and container  operations of Land  Transportation,  the  intermodel
marketing arm of Land Transportation and the related brokerage operation.

In connection  with  companies  acquired in 1998 and 1997 we determined  certain
administrative  positions  were redundant and accrued $4.2 million for severance
related to the  elimination  of those  positions.  The  liability  recorded  was
charged to the goodwill of the companies  acquired.  During 1999, $1 million was
paid in cash and an  adjustment  of $.2  million  was  recorded  to  reduce  the
liability with a corresponding reduction in goodwill. The remaining balance will
be paid through 2003 in accordance with certain employment contracts.

Early  in  1999  the  Company  began  formulating  a plan  to  consolidate  most
"backoffice  operations" at its service center in Groveland,  Florida.  The plan
was finalized  during the fourth quarter of 1999 with the completion of the last
acquisition.  The first  phase of the plan  involves  consolidating  accounting,
financial  reporting,   fuel  taxes,  risk  management,   payroll,   credit  and
collections,  disbursements,  certain  safety  functions  and  purchasing of the
companies acquired during 1999. The employee groups covered were notified during
December 1999. As a result of this plan, a charge of $.5 million was recorded as
part of the acquisition cost of the companies  acquired and charged to goodwill.
The charge is  intended  to cover  severance  for  approximately  100  employees
affected and the relocation of three employees to the Groveland  service center.
The amount of  severance  each  employee is entitled to is based on the years of
employment  of each employee  affected.  The plan is expected to be completed by
September 2000 at which time the severance will be paid.  Beginning in 2001, the
Company  expects the elimination of these positions will result in annual pretax
savings of $1.0-$2.0 million.

See note 13 for the Unaudited Pro Forma  results of the  acquisitions  discussed
above.

NOTE 4: Discontinued Operations

During the second quarter of 1997, the Company approved a plan to dispose of its
parcel delivery and courier  operations.  After  negotiations with a third party
failed,  the  Company  executed a contract  for the sale of the parcel  delivery
business to a company controlled by Transit Group's Chairman.  The sale contract
became  effective on September 30, 1997.  Under the contract,  the buyer assumed
certain net liabilities  related to the parcel delivery  operations and received
876,569  shares of the Company's  common stock in exchange.  In 1999 the Company
issued an additional 50,130 shares of its common stock in final  satisfaction of
all liabilities.

Revenues  attributable to the  discontinued  business were $14.7 million for the
year ended December 31, 1997 and zero thereafter.

The loss from  discontinued  operations  has been  reflected  as a disposal of a
segment.  The December 31, 1997  consolidated  statements of operations and cash
flows for the year then ended  have been  restated  to  separately  reflect  the
financial  position,  results of operations,  and cash flows of the discontinued
parcel  delivery  and  courier  businesses.   Net  liabilities  of  discontinued
operations were nil and $.3 million at December 31, 1999 and 1998 respectively.

NOTE 5: Preferred Stock and Non Redeemable Preferred Stock.

In the second quarter of 1997 the holders of the Company's outstanding preferred
stock elected to convert their preferred stock and accrued dividends of $385,000
to common stock.  The Company issued  4,323,922  shares of common stock upon the
conversion.

In May 1999 the Company  issued five million  shares of 9% Redeemable  Preferred
Stock for $5.00 per share.  Each Redeemable  Preferred Share may be converted at
any time,  at the  option  of the  preferred  shareholder,  for one share of the
Company's  common stock.  The  Redeemable  Preferred  Stock  agreement  contains
certain anti-dilutive  provisions which would require the issuance of additional
Redeemable  Preferred  Shares if the Company  issues any of its common  stock at
less than $5.00 per share.  Beginning  three  years from the date of issuance of
the  Redeemable  Preferred  Shares,  (and  for the  succeeding  two  years)  the
preferred  shareholders  can cause the Company to purchase up to 33% per year of
the  outstanding  Redeemable  Preferred  Stock for $5.00 per share. In addition,
certain  conditions  such as a change in ownership can accelerate the redemption
requirement.

The Company is required to provide  financial  information and maintain  certain
financial   conditions.   The   conditions   involve   limitations  on  mergers,
acquisitions,  asset  sales,  and  additional  indebtedness.  The Company was in
compliance of all of requirements of this Agreement.  Should an Event of Default
occur and  remain,  the  holders of the  Preferred  Stock will have the right to
elect two members of the Board of Directors of the Company.

<PAGE>


NOTE 6: Income Taxes

The (benefit) provision for income taxes consisted of the following:
<TABLE>
<CAPTION>

                                                                               Years ended December 31,
                                                          -----------------------------------------------------------------
                                                                 1999                   1998                   1997
                                                          -------------------    -------------------     ------------------
Current:
<S>                                                           <C>                       <C>
     Federal                                              $             189     $              145                  -----

     Foreign                                                              34                    13                  -----

     State                                                               370                   394                  -----

                                                          -------------------    -------------------     ------------------
       Total current                                                     593                    552                    43
                                                          -------------------    -------------------     ------------------

Deferred:
     Federal                                                             643                (7,190)                  -----
     Foreign                                                              99                  -----                  -----
     State                                                               396                  (476)                     28
                                                           -------------------    -------------------     ------------------
       Total deferred                                                  1,138                (7,666)                     28
                                                           -------------------    -------------------     ------------------

       Provision (benefit)  for income taxes               $           1,731      $         (7,114)       $             71
                                                           ===================    ===================     ==================

The components of the net deferred tax liability are as follows:

                                                                       Years ended December 31,
                                                              --------------------------------------------
                                                                     1999                     1998
                                                              --------------------     -------------------

       Depreciation                                             $       27,232          $         7,024
       Net operating loss                                               (9,626)                 (10,290)
       AMT credits                                                        (368)                    ----
       Cash to accrual                                                     616                      466
       Bad debt reserve                                                   (919)                    (262)
       Accrued expenses                                                 (1,502)                    (428)
       Valuation of notes payable                                         (995)                    (161)
       Other                                                               271                       27
                                                                --------------------     -------------------
                                                                        14,709                   (3,624)
       Valuation allowance                                               1,118                    2,960
                                                                --------------------     -------------------

           Net deferred income tax liability                    $       15,827           $         (664)
                                                                ====================     ===================
</TABLE>



<PAGE>


The difference between the provision for income taxes attributable to continuing
operations  and the amounts that would be expected  using the Federal  statutory
income tax rate of 34% is explained below.
<TABLE>
<CAPTION>
                                                                                Years ended December 31,
                                                                       1999               1998               1997
                                                                ------------------ ------------------ -----------------

<S>                                                                    <C>                <C>                <C>
Tax at federal statutory rate - continuing operations            $           2,078  $           1,558  $           113
Tax at federal statutory rate - discontinued operations                       ----               ----           (4,048)
Change in deferred tax asset valuation allowance                            (2,671)            (9,710)           3,710
Nondeductible expenses                                                       1,903              1,080              226
State taxes, net                                                               288                (54)              47
Foreign tax                                                                    133                 12               23
                                                                 ------------------ ------------------ -----------------

Net provision (benefit) for income taxes                         $           1,731  $          (7,114) $            71
                                                                 ================== ================== =================
</TABLE>
At December  31,  1999,  the Company has $31,024 of federal net  operating  loss
carryforwards potentially available to offset taxable income which expire during
the years 2009 to 2018. In 1998, the Company  recognized  $7,504 in benefits for
these net operating losses because  management  believed it was more likely than
not that the  benefits  will be  realized.  The  Company  will be limited in the
amount of net operating loss which can be offset  against  taxable income in any
given year because of significant changes in ownership.  Certain pre-acquisition
losses of acquired companies will be unusable because of the change of ownership
provisions  and a valuation  allowance  remains for those losses.  To the extent
these losses are  utilized,  any benefit will be used to reduce  goodwill as the
losses were incurred by acquired  subsidiaries.  In 1999,  Federal  consolidated
return  regulations  were issued that changed the rules for using operating loss
carryovers  by  eliminating   the  requirement  to  apply  the  separate  return
limitation  loss years  limitations to situations in which a change of ownership
as defined in Section  382 of the  Internal  Revenue  Code  occurred  within six
months of an acquired company  becoming a member of the group. As a result,  the
Company  reduced  the  valuation   allowance  for  these  net  operating  losses
carryforwards  by $2.7  million by  recording a tax benefit to the  statement of
operations.  Effective  for  tax  year  beginning  after  August  5,  1997,  the
carryforward  period for net  operating  losses has been  extended from 15 to 20
years. Tax loss carryforwards at December 31, 1999 expire as follows:


                         Year of Expiration                  Federal
                     ----------------------------     ---------------------

                                2009                  $                434
                                2010                                 3,993
                                2011                                 9,680
                                2012                                14,798
                                2017                                 1,339
                                2018                                   780
                                                -     ---------------------

                                                      $             31,024
                                                      =====================




<PAGE>



<TABLE>
NOTE 7: Property, Equipment and Capitalized Leases
                                                                             December 31,
                                                               -----------------------------------------
                                                                      1999                  1998
                                                               -------------------    ------------------

                 Property and equipment:
-
<S>                                                                        <C>                   <C>
                   Land                                        $            1,083     $            728
                   Building                                                 3,734                2,815
                   Revenue equipment                                      106,950               38,078
                   Other                                                   16,957                6,013
                                                               -------------------    ------------------
                     Total                                                128,724               47,634
                   Less accumulated depreciation                           18,782                7,362
                                                               -------------------    ------------------

                                                                          109,942               40,272
                                                               -------------------    ------------------

                  Capitalized leases:
                   Revenue equipment                                       5,522                 3,434

                   Other                                                      896                  380
                                                               -------------------    ------------------
                     Total                                                  6,418                3,814
                   Less accumulated amortization                            1,642                1,268
                                                               -------------------    ------------------

                                                                            4,776                2,546
                                                               -------------------    ------------------

                                                               $          114,718     $         42,818
                                                               ===================    ==================
</TABLE>
Depreciation  and  amortization  expense  related  to  property,  equipment  and
capitalized leases was $12.1, $6.6 and $1.3 million for the years ended December
31, 1999, 1998 and 1997, respectively.



<PAGE>

<TABLE>
<CAPTION>

NOTE 8: Long-Term Debt
                                                                            December 31,
                                                           ------------------------------------------------
                                                                   1999                       1998
                                                           ----------------------     ---------------------

Notes payable to commercial lenders,        secured
primarily by revenue       equipment;  interest rates
from 5.7% to      12%;     payable     in     monthly
installments      through 2003
<S>                                                                   <C>                       <C>
                                                           $           70,212         $          23,609

Notes payable to bank, secured by land      and
building with a net book value of   $3.4     million;
interest rates from 6.9% to         12%;  payable  in
monthly installments       through  2015
                                                                        1,425                     1,523

Note payable to affiliate of the Chairman,  unsecured;
   9% interest; $.5 million due April 1999 and $1 million
   due each year thereafter
                                                                       ------                     3,500

Note payable to bank, cross collateralized to credit
   facility; interest at 2.50%over LIBOR (5.06% at December
   31, 1998) payable monthly with final maturity in 2002
                                                                       ------                     5,000

Credit  facility,  secured by  accounts  receivable and
   certain fixed  assets:interest at 2.00% over LIBOR
   (6.48% at December 31, 1999)  interest  only for one
   year; acquisition  credit converts to a four year term
   facility payable quarterly with final maturity in 2004
                                                                       88,345                    ------


Credit  facility  secured  by  accounts   receivable;
   interest rate at 2.25% over LIBOR
                                                                       ------                    17,156
                                                           ----------------------     ---------------------

                                                                      159,982                    50,788
Less current portion                                                   22,404                    10,754
                                                           ----------------------     ---------------------

                                                           $          137,578         $          40,034
                                                           ======================     =====================
</TABLE>
The  credit  facility  contains  customary   financial  covenants  that  include
limitations  on  dividends,  indebtedness,  mergers,  sale  of  assets  and  the
repurchase of common stock.  Requirements  exist to maintain  minimum  levels of
coverage for a Fixed Charge  Coverage  Ratio,  Leverage  Ratio,  Asset  Coverage
Ratio,  and Minimum  Consolidated  Net Worth (all  defined).  The Company was in
compliance  with all covenants  with the exception of the Fixed Charge  Coverage
Ratio at  December  31,  1999.  This  covenant  was  waived at that date and the
Company believes that this covenant will be maintained during 2000. Accordingly,
the credit facility remains classified  according to the terms of the agreement.
At  December  31,  1999,   $36.7   million  was   available   under  the  credit
facility.Long-term debt matures as follows:
<TABLE>
<CAPTION>
      Years Ended                                             Long-term
      December 31,                                              Debt
      --------------------------------------              ------------------

<S>   <C>                                                          <C>
      2000                                                 $        22,404
      2001                                                          20,447
      2002                                                         14,705
      2003                                                          10,253
      2004                                                          86,896
      Thereafter                                                     5,277
                                                           ------------------
          Total long-term debt                                     159,982
          Less current portion                                      22,404
                                                           ------------------

            Long-term portion of long-term debt            $       137,578
                                                           ==================
</TABLE>
NOTE 9: Capitalized LeasesThe Company has entered into certain lease agreements,
which have been accounted for as capitalized  leases.  Substantially  all of the
capitalized  leases are for vehicles.  The present value of such commitments for
the capitalized leases are as follows:
<TABLE>
<CAPTION>
                                                                Capitalized
        Years Ended                                                Lease
        December 31,                                            Obligations
        --------------------------------------------          -----------------

<S>          <C>                                                       <C>
             2000                                             $          1,586
             2001                                                        1,452
             2002                                                          500
                                                              -----------------
                                                              -----------------
        Total minimum obligations                                        3,538
        Less current portion                                             1,586
                                                              -----------------

            Long-term capitalized lease obligations           $          1,952
                                                              =================
</TABLE>
Interest expense on obligations  outstanding  under  capitalized  leases was $.3
million for all years  presented.NOTE  10: Operating LeasesIn November 1998, the
Company  entered into a $50 million  equipment  lease facility with a commercial
lender. The facility is available to refinance of certain existing equipment and
the remainder to support future equipment  leases.  The terms of the leases will
vary  from  30-48  months,  for  used  equipment,  and up to 60  months  for new
equipment.  Initial  fundings  under the facility bore interest at rates between
5.50% and 6.00%. Interest rates on future fundings will be subject to changes in
the 3-year U.S.  Treasury  interest rates.  At the expiration of the lease,  the
Company may renew the lease,  return the  equipment  subject to the payment of a
Terminal Rate Adjustment Clause or purchase the equipment. At December 31, 1999,
this  facility was fully  utilized.The  Company also leases  terminal and office
facilities under  non-cancelable  operating lease agreements.  Lease terms range
from one to five years and provide that the Company will pay real estate  taxes,
maintenance,  insurance and certain other expenses.  At December 31, 1999 future
minimum  payments  under  non-cancelable  operating  leases having an initial or
remaining term of more than one year were:
<TABLE>
<CAPTION>
                                                           Operating
                                                          Years Ended
                 Years ended                                 Lease
                 Years Ended                              Years Ended
                 December 31,                             Obligations
                 ------------------------             ---------------------

<S>                   <C>                                     <C>
                      2000                            $            25,111
                      2001                                         22,263
                      2002                                         17,185
                      2003                                         10,465
                      2004                                          2,622
                                                      ---------------------

                          Total                       $            77,646
                                                      =====================
</TABLE>
Total rent expense under all operating  leases was $20.4  million,  $6.1 million
and  $.2  million  for the  years  ended  December  31,  1999,  1998  and  1997,
respectively.  The Company believes that upon expiration of these leases it will
be able to negotiate new leases on  acceptable  terms  although  lease costs may
increase.NOTE 11: Fair Values of Financial Instruments For instruments including
cash,  accounts receivable and payable,  and accrued expenses,  carrying amounts
approximate  fair value. The carrying amount of long-term debt and capital lease
obligations  which bear interest at floating rates, also approximate fair value.
Fixed-rate  debt totaling $71.6 million has a fair value of $67.9  million.  The
fair value of the preferred stock is approximately  $24.0 million.NOTE 12: Stock
Options and WarrantsThe  Company has granted options and warrants to acquire its
common stock at various times under  various  plans,  contracts  and  employment
agreements that approximated or exceeded fair market value at the date of issue.
Options and warrants which vest over various  periods (to a maximum of 4 years),
may be exercised  over periods  ranging up to ten years and generally  expire in
five to ten  years.  The 1998  Stock  Option  Plan  provides  that the  Board of
Directors or its delegate may grant stock  options,  stock  appreciation  rights
("SARs") or  restricted  stock  awards,  to selected  employees,  directors  and
independent contractors.  The maximum aggregate number of shares of common stock
that may be issued under the Plan is 2,000,000,  plus 1% of the total issued and
outstanding shares as of December 31 of the year the Plan is in effect.A summary
of outstanding options and warrants is as follows:
<TABLE>
<CAPTION>
                                                                        December 31,
                                         ---------------------------------------------------------------------------
                                                        1999                                   1998
                                         -----------------------------------    ------------------------------------
                                                           Weighted-Avg.                           Weighted-Avg.
                                            Shares        Exercise Price            Shares        Exercise Price
Outstanding beginning of
<S>                                          <C>              <C>                   <C>               <C>
  year                                       3,413,058        $ 3.69                2,754,158         $ 3.19
Granted during the year                        903,700          4.49                  807,000           5.81
Exercised                                     (699,517)         2.93                  (49,900)          4.54
Forfeited or expired                          (148,766)         4.80                  (98,200)          6.01
                                          --------------                         ---------------

Outstanding at end of year                   3,468,475        $ 3.99                3,413,058         $ 3.69
                                          ==============                         ===============

Exercisable at end of year                   2,250,058                              2,394,787
                                          ==============                         ===============
</TABLE>
Options and warrants outstanding at December 31, 1999 were exercisable at prices
ranging   from   $1.43  to  $6.88.   All  stock   options   and   warrants   are
non-compensatory. Options and warrants outstanding at year end may be summarized
as follows:
<TABLE>
<CAPTION>
                    Range of                          Number                     Weighted -Average
                 Exercise Price                    Outstanding                     Exercise Price
           ----------------------------      -------------------------       ---------------------------

<S>               <C>    <C>                         <C>                               <C>
                  $1.43 - 1.99                           36,250                        $1.44
                   2.00 - 2.99                        1,274,318                         2.16
                   3.00 - 3.99                          132,250                         3.59
                   4.00 - 4.99                        1,074,257                         4.30
                   5.00 - 5.99                          154,500                         5.21
                   6.00 - 6.88                          796,900                         6.44
</TABLE>

Additionally,  in  conjunction  with the initial  public  offering,  the Company
issued 690,000 warrants.  Two warrants entitle the holder thereof to purchase at
a price of $7.50 per share, one share of common stock at any time until November
16,  2000.  The warrants  are subject to  redemption  by the Company at $.05 per
warrant  at any time on 30  days'  written  notice,  provided  that the  average
closing  bid  price of the  common  stock on  NASDAQ  is at least  $8.50 for ten
consecutive  trading  days  ending  five days prior to the date of the notice of
redemption.

<PAGE>


The Company has adopted SFAS No. 123, "Accounting for Stock-Based Compensation".
In accordance  with the provisions of SFAS 123, the Company  applies  Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and
related  Interpretations  in accounting for its stock option and warrant grants.
If the Company had elected to recognize compensation expense based upon the fair
value at the  grant  dates  for  awards  under  this  plan  consistent  with the
methodology prescribed by SFAS 123, the Company's results of operations would be
as follows:



<TABLE>
<CAPTION>

                                                                           1999              1998             1997
                                                                     ---------------- ------------------ ---------------
<S>                                                                          <C>               <C>           <C>
 Net  income (loss):                    As reported                          $ 4,380           $ 11,696      $ (11,644)
                                        Unaudited pro forma                  $ 3,335           $ 10,873      $ (12,984)

 Net income (loss) per share:           As reported - basic                      .11                .52          (1.08)
                                        Unaudited pro forma
                                       basic                                     .07                .49          (1.21)

                                        As reported - diluted                    .10                .49          (1.08)
                                        Unaudited pro forma
                                       diluted                                   .07                .46          (1.21)
</TABLE>
The fair value of each  option and  warrant  is  estimated  on the date of grant
using the Black-Scholes option pricing model with the following weighted-average
assumptions  used for  grants  in 1999,  1998 and 1997,  respectively;  expected
volatility of 22%, 1.02% and 1.22% and risk-free  interest rates of 5.44%, 4.28%
and 5.48%, respectively. An expected option term of 5 years for both periods was
developed  based on historical  grant  information.  Because the Company has not
paid  dividends  and  anticipates  retaining  earnings to provide  funds for the
operation and expansion of the Company in the future,  no dividends were assumed
in the  Black-Scholes  option pricing  model.Because the Company's stock options
and warrants have characteristics  significantly  different from those of traded
options and warrants,  and because changes in the subjective  input  assumptions
can materially  affect the fair value  estimate,  in management's  opinion,  the
existing models do not necessarily provide a reliable single measure of the fair
value of its employee stock options and  warrants.NOTE  13:  Unaudited Pro Forma
Results of Operations  Since July 1997, we have acquired 19 truckload  carriers.
Combining  the  purchasing  power of these  companies  has  enabled us to reduce
certain  costs  particularly  in the areas of  insurance,  interest  and leasing
costs,  fuel, and overhead.  Our strategy is to allow the acquired  companies to
focus on marketing,  customer service,  and operations while  administrative and
financial  costs are centralized in the Corporate  Services  Division of Transit
Group Transportation, LLC.

The unaudited pro forma financial  information reflects the operations of the 19
acquired  companies  as if they all had been  acquired  on January 1, 1998.  The
following  adjustments  were  made to the  historical  financial  statements  of
acquired companies prior to their acquisition by us:

o Reduced  depreciation  expense  due to changes in  depreciation  policies  and
estimated  lives; o  Amortization  of goodwill  recorded in connection  with the
acquisitions; o Recognition of lease expense incurred in connection with certain
sale-lease back transactions;  o Additional  interest costs for the cash portion
of the acquisition  costs; o Interest costs of the acquired  companies have been
adjusted to reflect our financing costs; and o Provision for income taxes at our
estimated annual rates.
o Excluded the impact of the change in the valuation  allowance for deferred tax
assets.
<PAGE>

No  projected  provision  for  cost  reductions  (such as  insurance,  overhead,
purchasing, and fuel) have been reflected in the historical financial statements
of the subsidiaries from January 1, 1998 through the date of acquisition.

<TABLE>
<CAPTION>

                                                                                December 31,
                                                                  -----------------------------------------
                                                                        1999                    1998
                                                                  -----------------       -----------------
<S>                                                               <C>                     <C>
                 Operating revenues                               $       493,968          $      468,156
                                                                  =================       =================
                 Net income                                       $         4,564          $        7,143
                                                                  =================       =================
                 Income per basic common share                    $           .14          $          .22
                                                                  =================       =================
                 Income per diluted common share                  $           .14          $          .21
                                                                  =================       =================
                 Weighted average number of basic common shares
                 outstanding                                           31,887,857              32,194,435
                                                                  =================       =================
                 Weighted average number of diluted common
                 shares outstanding                                    32,743,056              33,449,366
                                                                  =================       =================
</TABLE>
NOTE 14: Related Party  TransactionsThe  Company leases certain  facilities from
several of the former owners of the businesses  acquired.  During 1999, 1998 and
1997, rental payments under operating leases to related parties  aggregated $1.4
million, $.1 million and $.2 million  respectively.  Payments to related parties
under  capitalized  leases totaled $1.6 million in 1999 and 1998 and $.8 million
in 1997.

The terms of the leases with related  parties is, in the opinion of the Company,
no less  favorable to the Company than could be obtained  from  unrelated  third
parties.

In connection with the  acquisition of three  companies  Transit Group loaned an
aggregate of $1.3 million to selling shareholders. A $.7 million note related to
the 1997  acquisition  of Rainbow was redeemed in the third  quarter of 1999 for
118,877 shares of the Company's common stock. A note receivable in the amount of
$.2 million was due in April 1999 at which time it was  increased to $.4 million
and extended to May 2000.  A $.4 million note due in November  1999 was extended
to May 2000.  During 1999 $.5 million was loaned to a shareholder in the form of
an 8% demand  note  secured by stock and other  advances of  approximately  $0.5
million were made to employees..

NOTE  15:
Commitments  and  ContingenciesIn  connection  with the  acquisitions of Capitol
Warehouse,  Service Express and Carroll Fulmer,  the Company granted the selling
shareholders  the right to require the Company to redeem a portion of the shares
which they received in exchange for selling their businesses to the Company. The
dollar amount of stock subject to mandatory redemption by the Company aggregated
approximately $8.1 million.  The redemption rights expire in the amounts of $2.1
million  at August 15,  1998 and $6.0  million  at August  29,  2003.

Holders of  redemption  rights with respect to $6.0 million of stock may require
either the Company to redeem the stock or a major  shareholder of the Company to
acquire the stock at a price of $3.60 per share.  Through December 31, 1998, the
Company  has  received  notification  that  shareholders  have  exercised  their
redemption  rights with respect to approximately  $2.3 million.  Of this amount,
approximately  $2.25  million  has been  purchased  by third  parties  and $0.08
million  has been  redeemed  by the  Company,  thereby  reducing  the  Company's
obligation. To the extent such redemption rights are exercised, the Company will
be  required  to fund  the  cash  required  to meet its  obligations  under  the
redemption  rights  by  drawing  on bank  lines  which may be  available  to its
subsidiaries,  or to call upon a major  shareholder  to purchase the stock under
such  shareholder's  obligations and guarantees  associated with the acquisition
contracts.

In  connection  with the  sale of the  Company's  parcel  delivery  and  courier
operations, the Company issued certain warranties regarding the value of certain
assets and  liabilities  transferred  to the  purchasers of the  businesses  and
remains  contingently  liable on certain real and personal  property leases.  To
provide for  possible  liabilities,  which would arise under the  warranties  on
lease  agreements,  the Company has  recorded a liability of  approximately  $.3
million and $. 6 million at December 31, 1998 and 1997, respectively.

The Company is a party to various  other legal  actions  which are  ordinary and
incidental  to its  business.  While the  outcomes  of legal  actions  cannot be
predicted  with  certainty,  the  Company  believes  the outcome of any of these
proceedings, or all of them combined, will not have a material adverse effect on
its consolidated financial position or results of operations.

During 1999, the Company entered into an agreement to purchase 600 tractors over
a two year period at a fixed price per unit.  The  Company is not  obligated  to
purchase  600  tractors.   The  price  for  the  tractors   purchased   will  be
retroactively  increased  to  reflect  an  appropriate  price for the  number of
tractors  purchased.  Based on the actual number of tractors  purchased  through
December 31, 1999 and planned  purchases  for 2000,  the Company does not expect
any change to the price per tractor.

During 1998, the Company  entered into an agreement to purchase 3,000  satellite
communications  and  monitoring  units over a three year period at a fixed price
per unit. The Company is not obligated to purchase 3,000 units. However,  should
the Company not purchase 3,000 units,  the price for the units purchased will be
retroactively  increased to reflect an appropriate price for the number of units
purchased.  Based on the actual number of units purchased  through  December 31,
1999 and planned  purchases for 2000,  the Company does not expect any change to
the price per unit.







<PAGE>


Note 16: Quarterly Results of Operations (Unaudited)
<TABLE>
<CAPTION>

                                                             Three month periods ended
                                      ----------------------------------------------------------------------

                                       March 31,         June 30,           September 30,         December 31
                                      ------------ ------------------     -------------------     -----------
                                                   Reported   Restated    Reported   Restated
Year ended December 31, 1999
--------------------------------------

<S>                                      <C>        <C>         <C>        <C>          <C>        <C>
Total revenues and other income          $ 64,843   $ 75,167    $ 75,167   $ 93,372   $  93,272   $ 122,244

Operating income                            2,961      4,698       4,698      5,052       4,586         719

Income before income taxes                  1,959      3,181       3,181      3,405       2,939      (1,968)

Income taxes (benefit)                      1,026      1,579      (1,092)     1,741       1,559         238

Net income                                    933      1,602       4,273      1,664       1,380      (2,206)

Preferred stock dividends                       0       (296)       (296)      (562)       (562)       (562)

Amount available to common shareholders       933      1,306       3,977      1,102         818      (2,768)

Basic income (loss) per common share       $ 0.04     $ 0.05      $ 0.15     $ 0.04      $ 0.03     $ (0.09)

Diluted income (loss) per common share     $ 0.04     $ 0.05      $ 0.15     $ 0.04      $ 0.03     $ (0.09)


Year ended December 31, 1998
--------------------------------------

Total revenues and other income          $ 26,431   $ 35,408               $ 55,925                  59,789

Operating income                            1,747      2,139                  2,887                   2,119

Income before income taxes                    943      1,272                  1,264                   1,103

Income taxes (benefit)                        101        108                     43                  (7,366)

Net income                                    842      1,164                  1,221                   8,469

Basic income (loss) per common share       $ 0.04     $ 0.05                 $ 0.05                  $ 0.38

Diluted income (loss) per common share     $ 0.04     $ 0.05                 $ 0.05                  $ 0.35
</TABLE>



 The second  quarter of 1999 has been restated to reflect the  utilization  of a
$2.7 million net operating loss  carryforward  discussed in Note 6. In November,
the Emerging  Issues Task Force  determined that this benefit should be recorded
in  the  income  statement.   The  Company  adopted  the  accounting   principle
retroactively  to the  beginning  of the year and  recorded  the  benefit in the
quarter in which the tax law changed.  Upon  completion of our 1999 annual audit
we  determined  that third quarter  revenues were  overstated by $.1 million and
purchased transportation costs were understated by $.4 million. We have restated
the third  quarter of 1999 to  correct  these  errors.  The effect was to reduce
earnings per share from $.04 as originally reported to $.03.

Note 17: Subsequent Event

The Company has finalized and is currently  executing a plan to consolidate  the
"back office functions' of all remaining divisions. In connection with the plan,
the Company will record a charge to income  between $.9 million and $1.0 million
during the quarter ending March 31, 2000 to cover severance from the termination
of employees resulting from the plan. Each employee affected will be entitled to
an  amount  determined  based on the  number  of years  of  employment  with the
company.  The Company  expects the project to be completed  by December  2000 at
which time the severance  will be paid. The Company  expects the  elimination of
these positions will result in annual pretax savings of $1 million.